Sterling rose above 1.21 against The USD & rose closer to 1.14 against The EUR after surprisingly better than expected PMI figures for The UK. Strong economical growth within the services sector in February along with lower than expected public sector borrowing were the main drivers behind the climb in GBP. The next week is pretty quiet on the economic front for The UK so any movements in the market will come from both The ECB & Fed Reserve as we edge closer to both rate hike decisions.
Tuesday afternoon saw Canada’s inflation drop slightly by 0.2%. Inflation dropping naturally seems to be a running theme at the moment with The Euro-Zone inflation also expected to drop by 0.6%. Both figures coming in lower than expected could start to see movements across the board in relation to the respective rate hike decisions by the central banks. However, Goldman Sachs stated earlier this week that they expect The ECB to raise interest rates a further 3 times this year; in March, May & June. The ECB have been fairly aggressive since the turn of the year and continued rate hikes in Europe will bring their base rate closer to The UK’s and therefore could spring some volatility for GBP/EUR over the coming months.
We finish today off with The Fed Reserves FOMC minutes which may not match the hawkish tone The Fed Reserve have set, especially after strong data from the Jobs market and inflation figures which were both released after the last rate decision meeting. Markets have since raised expectations that The Federal Reserve would need to continue to lift rates in order to tame inflation.