By Alex Ellis

The week ahead for the pound:

The week ahead has a number of interesting releases but the most important for the pound will be on Thursday it what could potentially be a busy day.

The first release of note is the NIESR GDP estimate which can potentially throw up a few surprises, especially as GDP is seen as a clear indicator of the health of an economy. Currently UK GDP is seen as weak and therefore if this release did show a positive figure you would expect the pound to strengthen as a result. However if the GDP estimate is shown to be negative then you would expect the pound to weaken as a result.

The second release to note is the Bank of England’s interest rate decision which is due at 12:00. The UK is currently experiencing a spate of stagflation which is where inflation and unemployment are both high; this is weighing heavily on the pound. So it is unlikely that the BoE will raise interest rates on Thursday.

However I would still highlight this release as important because if they were to raise the rate then the pound would strengthen massively as a result. This is because high interest rates see investors gain a much greater return and therefore are seen as positive for an economy causing exchange rates to strengthen.

In other currency news:

US Dollar:

The USD initially weakened following concerns of rising oil prices but has now strengthened as recent global concerns have seen a regurgitation of a “flight to safety”.

This is where investors will move their money into those economies which are seen as safer havens in order to protect their positions. There are a number of releases that may be important but the one I would specifically highlight is Friday’s Retail Sales figure at 13:30.

Euro:

The single currency has once again been bailed out following comments from Jean Claude Trichet that interest rates may rise sooner rather than later. Trichet’s comments will be echoed in the market as rates for the Euro will continue to be strong until data can prove that Trichet was in fact being slightly pre-mature.