Daily Currency Update

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Pound traders refocus on UK data

GBP - British Pound

As has been mentioned previously, investors are looking more and more towards key economic data releases now that the UK has some clarity over Brexit and its deadline. The focus today comes in the form of wage growth data which could be pivotal as the Bank of England is set to decide at the end of the month to cut interest rates by a further 25 basis points. With inflation coming in at 1.3% last week, and both Mark Carney and Silvana Tenreyro commenting about the possible need for further easing, markets are now pricing in a 70% chance of another cut.

Interestingly, in the face of this investors are actually increasingly bullish on the pound with bets hitting the highest level since April 2018. Sterling therefore finds itself caught between investors' hopes and the prospect of monetary easing. There will be more clarity by the end of the week with GBP/USD flirting around 1.30.

Key Movers

With Martin Luther King Day yesterday US markets were shut and globally events were quite subdued. The Bank of Japan unsurprisingly kept their monetary policy unchanged whilst equities in Asia are riling in response to the outbreak of the coronavirus in China which is very similar in natrue to the Sars virus from the early noughties. As a result the Aussie dollar and Chinese yuan have dropped off whilst the safe haven currencies of Switzerland and Japan have picked up.

Looking towards today we have German ZEW Economic Sentiment ahead of Thursday's ECB meeting as well as the World Economic Forum in Davos starting. Let's hope that Greta Thunberg and Donald Trump walk past each other again.

Expected Ranges

GBP/USD: 1.2955 - 1.3110 ▼

GBP/EUR: 1.1660 - 1.1780 ▼

GBP/AUD: 1.8970 - 1.9150 ▲

GBP/CAD: 1.6850 - 1.7070 ▼