Home Daily Commentaries Sterling edges higher on positive retail sales

Sterling edges higher on positive retail sales

Daily Currency Update

Last week saw a flurry of positive data for the pound, with UK CPI, unemployment and month-on-month retail sales all reporting an upbeat tone. With the prospect of another interest hike from the Bank of England in March, Sterling is benefitting from the news and is testing key 1.20 psychological levels against the euro. Today sees the release of both Services and Manufacturing PMI's in the UK and with this we could see the pound supported further.

With global geopolitical events driving markets, any change in the rhetoric around the delicate Russia Ukraine saga could see the pound suffer. It is currently been supported by ongoing denials from Putin that an attack on Ukraine is imminent and the fact that troops have been pulled back from the border. However, President Biden appears convinced that they have intelligence to suggest that the threat of an attack is very real. We have meetings on the cards between the pair, and the situation remains delicate, as will support for the pound if the threat of an attack increases.


Key Movers

Markets have started the week on an optimistic note as Biden and Putin agreed in principle to meet, with Thursday’s summit between US Secretary of State Antony Blinken and his Russian counterpart Sergey Lavrov set to lay the groundwork. The situation remains delicate and any move towards a threat of an attack could see the US dollar to strengthen very quickly, sending GBPUSD lower. The US dollar benefits during times of global risk aversion, whereas currencies such as the Pound and the Euro tend to suffer.

The US data calendar remains very light, and thus it is geopolitical sentiment which may continue to drive market behaviour.  Elsewhere, the Euro could be supported by the market anticipation that the European Central Bank may now follow suit with increasing interest rates and tightening their monetary policy. For a while, the euro was lagging behind the pound and US dollar on the premise that the ECB were one step behind the Bank of England and Federal Reserve on increasing rates, but this gap appears to have closed in recent weeks.

There are a number of data posts from the Eurozone this week, starting with today's PMI readings. There is an expectation that there could be a rebound in these figures post the Omicron market slump in January.

Expected Ranges

  • GBP/USD: 1.3575 - 1.3655 ▲
  • GBP/EUR: 1.1970 - 1.2025 ▲
  • GBP/AUD: 1.8810 - 1.9100 ▲
  • EUR/USD: 1.1310 - 1.1385 ▼