[vc_row][vc_column][vc_column_text]Last week saw the recent volatility in the pound continue as investors reacted to some important UK data and the last developments in the Brexit process.

The pound opened this week trading lower versus the euro again, with GBP/EUR trending narrowly around €1.1340 although GBP/USD had climbed to US$1.3352.

Movement in Sterling this week is likely to be a little more subdued in the run up to the Christmas period, with the UK’s latest GDP figures and public borrowing data being the most impactful events.

Pound fluctuates as EU agrees to move forward with Brexit
It was another week of volatility for the pound last week as the UK currency was rocked by various data releases and developments related to Brexit.

The pound initially tumbled at the start of last week’s session as markets reacted to comments from Brexit Secretary David Davis, with investors concerned that his remarks about the possibility of alterations being made to the UK’s exit deal may have threatened to derail the Brexit process again.

These losses were extended further on Tuesday with the publication of the UK’s latest CPI figures, as another uptick in inflation sparked concerns about the financial pressures being placed on UK consumers.

Sterling was able to mount a recovery in the second half of the week, however, as a jump in wage growth in October helped to relieve some fears about the pressures facing UK households.

While the pound was able to tick higher again on Thursday morning as data showed that retail sales surged in November, the currency was forced to relinquish some of its gains by the afternoon as the Bank of England (BoE) concluded its latest policy meeting.

Investors were disappointed to learn that the BoE remains cautious on the possibility of future rate hikes, despite the continued uptick in inflation and progress in Brexit talks.

However the largest movement in Sterling came at the tail end of last week’s session, with GBP plummeting against it peers as the EU agreed to allow the second phase of Brexit talks to begin but announced that trade discussions would not begin until at least March.

Looking ahead to this week’s session the main focus will be on the latest UK growth figures, with the final reading of the UK’s third quarter GDP possibility strengthening the pound on Friday if it confirms that growth rose from 0.3% to 0.4% as expected.

Euro pressured by ECB rate outlook
The euro found much of it early gains undone last week as the European Central Bank’s (ECB) latest rate decision caused considerable weakness in the single currency.

Despite a string of lacklustre data releases in the first half of the week the euro was able to tick slightly higher in the first half of last week’s session due to the weakness of the other majors.

Capitalising on this at the start of the second half of the week the single currency was bolstered by the Eurozone’s latest PMI readings, with the flash release for December indicating that the bloc ended the year on strong footing, as growth in both the services and manufacturing sectors reached multi-year highs.

However the most impactful event for the euro last week was of course the ECB’s rate decision on Thursday.

While the bank unsurprisingly voted to keep rates on hold last month it was the ECB’s inflation outlook that caused the drop in the euro, with policymakers forecasting that inflation won’t begin to near the bank’s target rate of 2% inflation until at least 2020, suggesting that the next rate hike is still a long way off.

Meanwhile the focus for EUR investors this week will likely be on Germany’s latest business and consumer confidence data, with a possible uptick in both indexes likely to strengthen the Euro.

 

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* Information courtesy of Currencies Direct
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct.[/vc_column_text][/vc_column][/vc_row]