After a hectic few weeks of central bank decisions, inflation data, and political noise, this week finally looks set to offer a brief pause for breath. The docket is notably lighter — and for many traders, that’s a welcome change after the sharp volatility we’ve seen across Sterling pairs in particular.
Last week’s Bank of England decision and Rachel Reeves’ fiscal remarks triggered sizeable moves in GBP, with markets now fully focused on the upcoming UK Budget at the end of the month for the next major catalyst. Until then, Sterling is likely to trade with a cautious tone, vulnerable to softer domestic data and any renewed Dollar strength.
Tuesday – UK Labour Market Under Scrutiny
The first key data release comes on Tuesday morning, with the UK employment report. Expectations point to unemployment rising to 4.9%, up from 4.8% previously – a clear signal that labour market conditions are starting to cool.
Average weekly earnings are forecast to remain steady at 5%, but with inflation having fallen below that level, the squeeze on real wages is easing slightly. Nonetheless, a weaker jobs number could weigh on Sterling, especially given the Bank of England’s growing concern about slowing demand and the potential need for rate cuts later this year.
Later in the day, attention turns to Germany’s ZEW economic sentiment survey, expected higher at 41.0. A stronger reading could help the Euro gain modestly against both GBP and USD, especially if broader Eurozone data continues to show signs of stabilisation.
Thursday – Focus Turns to Growth Data
After a quiet midweek session, Thursday brings a cluster of releases that could inject some movement back into markets. Overnight, Australian employment figures are due, with forecasts suggesting a small improvement in job creation and a lower unemployment rate. That could provide a short-term lift to the Australian Dollar, particularly against the Euro and Pound.
In the UK, GDP data is expected to show growth of just 0.2%, marking a slight 0.1% contraction from the prior reading. While not disastrous, this underlines the fragile state of the UK economy and will likely add to pressure on Sterling, especially given ongoing concerns about weak business investment and slowing consumer demand.
At the same time, the Eurozone industrial production figures are expected to rise 0.8%, a modest but welcome sign of recovery in Europe’s manufacturing sector – and a factor that could lend the Euro some strength ahead of Friday’s GDP release.
Friday – Eurozone GDP Rounds Off the Week
The final major data point comes on Friday, when the Eurozone publishes its GDP figures, expected to remain unchanged at 0.2% quarter-on-quarter. While unrevised data may not spark huge volatility, confirmation of stable growth would still reinforce the view that the Eurozone economy has managed to avoid contraction – a subtle but supportive backdrop for the Euro.
Summary
Overall, this week’s calendar may be quieter, but the underlying market themes remain the same:
- Sterling is still searching for stability ahead of the UK Budget.
- The Euro continues to grind higher on improving sentiment data.
- The Dollar remains the global barometer of risk, with strength likely to persist amid geopolitical uncertainty and US fiscal gridlock.
After several weeks of heavy volatility, this may be one of those rare occasions where markets pause for direction – but with political risks still simmering, calm can be deceptive.
GBP/EUR 1.1370 GBP/USD 1.3162 GBP/AED 4.8367
GBP/AUD 2.0153 GBP/CHF 1.0605 GBP/CAD 1.8444
GBP/NZD 2.3319 EUR/USD 1.1559 GBP/ZAR 22.6482