With the Euro (EUR) likely to remain in a weaker position in the week ahead, the Pound (GBP) is expected to extend its recent gains on the back of an improved UK Consumer Price Index.
Pound (GBP) Looking to Trend Higher on UK Inflation and Public Sector Net Borrowing Data
Volatility is likely for Sterling (GBP) over the coming week, with the release of the October Consumer Price Index, Retail Sales and Public Sector Net Borrowing figures. Expectations are for a stronger showing on the latest inflationary measure, which would be particularly reassuring to traders after September’s more disappointing negative reading. Although inflation is forecast to rise to 0.2% this is still a long way from the Bank of England’s (BoE) 2% target, meaning that more dovish policymakers are unlikely to be prompted into a nearer-term interest rate rise.
Also expected to show improvement on the month is Public Sector Net Borrowing, which is forecast to demonstrate that the domestic deficit narrowed further from 8.6 billion to 1.1 billion Pounds. A strong showing here would certainly bolster the Pound, with the sustained narrowing of the national deficit boding well for the robustness of the UK’s economy.
Downturn on ZEW Economic Sentiment Survey Forecast to Weigh on Euro (EUR) Outlook
All eyes will be back on Greece tomorrow, with the deadline for an agreement between the Greek government and its creditors regarding foreclosure laws. Should parties fail to resolve the deadlock the Hellenic nation will not receive its latest 2 billion Euro (EUR) tranche of bailout funds, dealing a strong blow to the viability of the current program. The day’s Eurozone Consumer Price Index report is not likely to cause particular movement, though, as investors anticipate no change on the earlier provisional figures.
Tuesday’s German ZEW Economic Surveys may weigh the single currency down further as the crucial Economic Sentiment Index is forecast to have weakened on the month. Following the unimpressive third quarter Eurozone GDPs additional signs of softening would see the Euro extend its current slump against rivals, particularly as the case strengthens for the European Central Bank (ECB) to introduce fresh monetary loosening.
Upcoming FOMC Meeting Minutes Predicted to Trigger GBP/EUR, GBP/USD Exchange Rate Volatility
The US Consumer Price Index is forecast to have seen a slight uptick on the year in October, rising from 0.0% to 0.1%, to suggest that inflationary pressure is building once again. A solid showing would likely add support to the odds of a December interest rate rise from the Federal Open Market Committee (FOMC), shoring up demand for the ‘Greenback’ (USD).
Also likely to trigger increased movement for the US Dollar will be the minutes from October’s FOMC policy meeting. As investors continue to grasp for indicators as to the direction in which the Fed will move at next month’s Rate Decision this particular release could have a significant impact upon both the GBP/EUR and GBP/USD exchange rates.