Inflation figures expected

Monday’s economic calendar was absent of any key releases for any of the major currencies and so it was technicalities and sentiment that drove any movement in the exchange rates. Over the weekend the pound had reached new highs against the Euro and the US Dollar, with buying levels at the best we have seen since January 2013 and November 2009 respectively. To little surprise traders took the opportunity to close buying positions and sell sterling from these peaks which saw exchange rates drop by around 0.5%. The pound may well have found a short term peak with gains of over 5 cents against the Dollar in just 10 days, and having hit resistance levels on the Euro.

Whether sterling is able to push on further or whether we are set for a sharp drop off will largely be decide by this morning’s events when the week’s key UK announcements get underway. At 9:30am we have the latest inflation figures and the headline rate of 2% that was reached last month is expected to remain the same although some fear that a drop below this level is very possible in the coming months. Inflation is always a very difficult one to predict with the currency markets as what is seen to be good for the economy does not always correlate with what is good for investment and return on interest. Traders will however be far more prepared to sell at these peaks than continue to buy meaning our risk of lower rates over the coming days is very real.

German and Euro-zone economic sentiment data will be released shortly after at 10:00am and a variety of smaller US releases will take up the afternoon and complete the days announcements. With a busy week ahead for sterling, make sure that you are staying in close contact with your broker to ensure you have weighed up your options and your risk for any imminent transfers that you may require.