After declining against its major peers last week as UK construction/manufacturing and industrial production reports failed to meet estimates, the Pound began the week trading lower against the Euro.
Sterling was able to pare declines against the US Dollar on Friday as US non-farm payrolls disappointed expectations and added to the case for the Federal Reserve refraining from tapering stimulus further in the months ahead.
The GBP/USD pairing largely held gains over the weekend as investors looked ahead to this week’s UK retail sales data.
The retail sales report for the UK is forecast to show another month of advancing sales, with a month-on-month increase of 0.3 per cent in December following a gain of 0.4 per cent in November.
On the year sales are expected to be 2.5 per cent higher.
However, the Pound went on to soften against almost all of its rivals as European trading progressed on Monday and Citigroup Inc’s economic surprise index for the UK responded to the recent run of worse-than-forecast news by dropping to its lowest level for three weeks.
The currency’s movement prompted this response from senior foreign-exchange strategist Paul Robson; ‘We’re seeing a squaring of some of the market’s favoured positions, which included Sterling doing relatively well. UK data are looking a bit softer than they were at the end of 2013 but the outlook still looks relatively favourable.’
The Pound did receive some support today as the Lloyd’s UK employment confidence gauge climbed from -14 to -12.
Further GBP/USD movement could be occasioned by today’s US monthly budget statement.
On Tuesday UK inflation data will be the main driver of Pound movement.
UK Economic Data to Look Out for this Week:
Tuesday: UK Producer Price Index
UK Consumer Price Index
UK Retail Price Index
Thursday: RICS House Price Balance
Friday: UK Retail Sales
Pound Exchange Rates Today:
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