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Market Update

Sterling exchange rates ended lower against the Euro and Dollar on Friday after a few days of strength against most G10 currencies.

The reason for the initial strength last week was the Bank of England indicating that the chances of negative interest rates were now lower than anticipated in 2020- which is positive for Sterling.

Looking ahead to next week, while the UK’s vaccine rollout has been helped underpin GBP despite the elevated number of virus cases, market sentiment will likely remain the key driver in the short term for the currency.

That said, domestic data will be worth watching and particularly the UK PMIs, which provides a timelier update regarding the UK economy. Although, with the services sector likely to remain in contractionary territory given the current national lockdown, eyes will be on the manufacturing sector, which will be the first look at business sentiment post-Brexit.

The Euro Inflation figures are set to be published this week. Final figures for Germany in December are released Tuesday and for the Eurozone as a whole Wednesday but as ever these will have little impact unless they are markedly different from the preliminary data published already.

More important are likely to be Tuesday’s ZEW economic sentiment index for Germany in January and Friday’s flash purchasing managers’ indexes, also for January. These PMIs are all expected to be a tad lower than in December, which would add to the general

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