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Bloomberg
The pound picked up on Monday against a weaker dollar, with further gains seen dependent on the progress of the UK’s Brexit plans and whether data will cement the odds of a Bank of England interest-rate increase.
Sterling’s moves could be influenced by any response from UK lawmakers or the European Union to the British prime minister’s “white paper†on her vision of the country’s future relationship with the bloc. Traders will also watch tier-one data releases this week covering employment, consumer prices and retail sales.
The pound recovered most of the recent losses by Monday after US
President Donald Trump made conciliatory remarks on the potential for a trade deal with the UK following a meeting with his British counterpart. Sterling had been hurt by Trump’s criticism of Theresa May over Brexit and the resignation of two of her senior ministers.
“With pound markets now scrutinising every bit of Brexit news, the focus really turns to the next round of UK-EU negotiations,†said Viraj Patel, a strategist at ING Groep NV.
“What Brussels says about May’s Brexit plan, and whether there is room for negotiation, matters for the pound. It’s a heavy week for UK data — but, for now, the BOE story is a secondary factor for markets.â€
The pound climbed 0.4 percent to $1.3274 in London, though was little changed against the euro.
BOE Governor Mark Carney and Deputy Governor Jon Cunliffe will speak on the Financial Stability Report with the UK’s Treasury Committee on Tuesday. The employment figures come out the same day, the inflation report on Wednesday and retail-sales data on Thursday. Money markets are pricing in a more than 80 percent chance that the central bank will raise rates next month.
Given the market’s high BOE pricing, this week’s important data and the political situation, the balance of risks is skewed to the downside for Jordan Rochester, a currency strategist at Nomura International Plc. ING continues to expect an August hike barring any data surprises.