Next week’s Brexit negotiations, BoE report and UK wages data can push the pound up providing all three events deliver positive news.
Viraj Patel, Foreign Exchange Strategist at ING, suggests that we might expect a frenetic week for GBP if certain events of the next seven days will take a positive direction for the UK.
The EU leaders’ summit on Thursday and Friday will be watched closely by pound traders to see whether the transition deal can be agreed.
“If successfully achieved, [the transition deal] would go some way to reducing the long-run risks surrounding the U.K. economy,” Patel said.
Also, on Thursday, the BOE is expected to announce its rate decision and meeting minutes. The question is whether policy makers are getting ready to increase rates again after the first in 10 years rate hike last November.
Although no changes are expected at next week’s meeting, the markets will be watching for signs that could indicate whether the Monetary Policy Committee is turning more hawkish.
UK wages data, expected to be released next week, will be crucial to understand the trend of the inflation. If the data indicates the rising inflation, it might prompt a rate hike and thus boost the Pound.
“If all the cards were to fall perfectly into place for GBP next week – that is the trifecta of an agreed Brexit transition deal, a status quo hawkish Bank of England policy message and constructive UK wage inflation data – we would expect to see a bullish breakout in GBP (especially against a weak USD), and would not rule out a sharp move up towards the year-to-date highs around 1.4250-1.4300 (+2.0% approx).”