Sterling remained steady against the Dollar on Monday, as investors awaited a scheduled meeting between US President Donald Trump and leaders from Ukraine and Europe, along with upcoming UK consumer inflation figures later in the week.
The Pound held at $1.3547, though it has risen around 2% against the Dollar so far in August, supported by positive economic data and a hawkish interest rate cut by the Bank of England earlier this month.
UK consumer inflation figures for July are set to be released on Wednesday, with Goldman Sachs analysts noting that domestic economic conditions are likely to remain a major driver of Sterling’s volatility against its European counterparts.
Goldman Sachs’ forecasts suggest that core inflation in the UK slightly fell to 3.62% last month, down from 3.66% in June, and 9 basis points below the Bank of England’s projected level.
“Even with regional underperformance, though, we continue to expect Sterling’s high beta to the Euro to support an upward path in GBP/USD,” analysts at Goldman Sachs said in a note.
On Monday, the Euro slipped 0.1% against the Pound, trading at 0.8624, Reuters reports.
“We do think that the UK’s CPI data is going to come in a little hotter this week. That should temporarily support the Pound but PMI (data) on Thursday should reverse that,” according to Nick Rees, head of macro research at Monex Europe.
“We think you’re going to see increased divergence between the UK and eurozone economies.”
The key economic event for global markets this week is the Kansas City Federal Reserve’s Jackson Hole symposium, running from 21st to 23rd August. Fed Chair Jerome Powell is scheduled to discuss the economic outlook and the central bank’s policy framework on Friday.
As it stands, money markets are pricing in an 85% probability that the Fed will reduce policy rates by 25 basis points next month.