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.

This looks set to continue until the BoE do raise rates and I am under the opinion that rates will rise around May time. The reason for this is that the revised GDP figure for the pound showed the economy contracted -0.6% in the fourth quarter, this was worse than previously thought and presents the BoE with a very serious problem – do they allow inflation to spiral or do they raise interest rates and risk the economy to enter into a double dipped recession.

When rates do rise the European MPC will have to raise their rates soon after or sterling will gain ground very quickly and we could even see rates as high as the mid 1.20′s. These rates have not been seen since the recession first hit so will come as welcoming news for those looking to trade GBP/EUR although owing to the uncertainty this could be some time away.

Also due out this week is some UK GDP data on Friday at 09:30, GDP is seen as one of the leading indicators of the health of an economy and therefore this can cause rapid movements on the market if released worse or better than expected.  Recent UK retail sales showed a massive increase on what was expected so we may see GDP released in similar brackets. If this were to happen then again I would expect the pound to strengthen as a result.

In any event all of the above can impact the value of your conversion regardless of whether you are buying or selling sterling, therefore by employing the services of an experienced currency broker you can protect your position and ensure that you maximise your savings. Use our contact form to be put in contact with one of our representatives.

High inflation is seen as a positive thing because the only way to combat this is to raise interest rates which of course make investing in an economy more attractive, so you would expect this to cause sterling strength. The market in fact reacted oppositely and the pound weakened over a cent against the Euro on a conversion of £100,000 this makes a difference of £776.

Tomorrow we have retail sales figures for the UK and these could help to mould the short term opportunities for sterling. Following December’s figure that was affected by the adverse weather all eyes will be closely watching this release to gain a much more truthful idea of how well the economy is performing.

The prediction was that once the coalition budget cuts came into play we would see an economic slowdown for the UK so typically you would expect this release to be worse than last years. However last January was a very sluggish month so the figure was released at 0%, because of this I don’t think it will be hard for this to be eclipsed by tomorrows figure.

Currently the UK is experiencing what is known as stagflation, this is where inflation is high but unemployment is also. Obviously raising interest rates makes the cost of living much more expensive and this is the dilemma facing the Bank of England, because if they raise the interest rates they risk damaging the UK’s already sluggish growth.

Retail sales are due at 09:30 (GMT) tomorrow morning so use our contact us form to be assigned an individual currency broker who can help to guide you through the process.

The majority of analysts are predicting that we will see an interest rate rise in the third quarter this should cause sterling exchange rates to improve vastly as high interest rates see investors get greater returns and therefore increases the likelihood of money being pumped into an economy.

Today’s figure has caused the pound to weaken slightly because although it showed that inflation had grown it was actually slightly lower than many investors were hoping. As discussed I still think that inflation will cause interest rates to rise but feel this will more likely be towards the summer months.

Tomorrow at 10:30 the Bank of England will announce their quarterly inflation report and this could cause some further movement in exchange rates as this will outline how the BoE view the long term future for inflationary figures. It would be wise to contact your currency broker around this time so as ensure that you are not caught out by any adverse movement.

Other data to watch out for:

• On Thursday at 07:00 we have Producer Price Index figures for Germany – these have been known to cause movement as Germany is seen as one of the economic super powers in Europe.
• Also on Thursday at 09:30 we have UK Retail Sales figures which again can cause large movements on the market, keep in close contact with your account manager around this time to ensure that you are well informed prior.