Sterling Steady Despite Retail Dip; Euro Awaits ECB Moves

Here’s this week’s overview of the Euro and Sterling:

Sterling

Sterling traded at 1.294 against USD last week, a 0.1% depreciation. A slight upside surprise in inflation and employment data coming in as expected helped hold Sterling steady against a stronger dollar.

Retail sales, however, did disappoint in June with poor weather conditions being cited as the main reason.

As a result, there was an increased likelihood of a rate cut in August, up to 43% from 39% the week prior (based on implied probabilities derived from pricing in currency futures markets).

Overall, the picture looks bullish for sterling with political stability and a resilient economy.

A number of wall street banks are raising their bets on the currency according to reports, with JP Morgan setting a target of 1.35 dollars per pound by March next year.

Euro

The Euro remained flat at 1.088 versus the US Dollar last week. The major news of the week was the ECB interest rate decision meeting on Thursday where it was decided to hold rates.

ECB President Lagarde gave virtually no forward guidance following the meeting, stating “What we do in September is wide open and will be determined on the basis of all the data that we will be receiving”.

With clear signs of softening data out of the US, markets are expecting the FED to loosen monetary policy faster than the ECB in upcoming meetings, which leaves room for potential Euro strength. The picture remains unclear, however, as of the moment.