Pound holding losses vs. euro and US dollar

The pound took a pretty big tumble as the weekend approached and the currency is still close to multi-week lows.

The pound took a pretty big tumble as the weekend approached and the currency is still close to multi-week lows.
What movement have we seen in the currency market?

Concerns that Scotland could be on the verge of calling another independence referendum pressured the pound lower at the beginning of last week, and it was largely downhill from there.

As we headed into the weekend the pound euro exchange rate was trading at 1.15, 2 cents lower than the weekís opening levels. The pound also shed 2 cents against the US dollar. It wasnít all bad news for Sterling however as the currency stabilised against the Australian dollar and managed to end the week higher against the New Zealand dollar.

Why did the pound slide?

The biggest pound losses followed the release of the UK’s latest services PMI, which fell from 54.5 to 53.3. As the service sector accounts for over 70% of total GDP, the surprisingly strong slowdown increased speculation that the Bank of England (BoE) could cut interest rates further despite the recent spike in inflation.

Concerns that the resilience demonstrated by the UK economy in the second half of 2016 could be at an end ensured that the pound consolidated its declines before the weekend.

What should you be looking out for?

While UK data is in pretty short supply until the tail end of the week, speeches from two BoE officials could inspire pound movement in the hours ahead.

Both Andy Haldane (the central bankís chief economist) and Deputy Governor Charlotte Hogg are set to speak and the tone of their comments could either help the pound recoup losses or see its downtrend continue. As Hogg only recently joined the BoE, her remarks will be of particular interest.

If she follows up her previous statement (‘the Monetary Policy Committee’s current forecast assumes steadily slowing growth in consumption, facilitated by a continued fall in the savings rate’) with similar commentary, the pound may not have the best start to the week.

In other currency news, the US dollar is likely to react to the day’s US durable goods orders and factory orders reports. Positive data would support bets of a March rate hike from the Federal Reserve ñ strengthening USD and weakening higher risk currencies like the Australian dollar and New Zealand dollar.

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