Sterling took a breather from its slide as data came in mostly stronger than expected last week. Can it hold on to its gains this time?
There are no major U.K. economic reports that the pound can turn to this week, which leaves Brexit updates as the likely driving factor in the days ahead.
As it is, Prime Minister Johnson is still set on leaving the EU with or without a deal by October 31, so several lawmakers are keen on collapsing his government with a no-confidence vote.
Although contingency plans for a “no deal” situation are already being explored and have provided some relief for sterling a few weeks back, the market focus seems to have shifted to the likelihood of a general election following Brexit.
Over the weekend, a document outlining the likely implications of a “no deal” Brexit was leaked, but it doesn’t seem to be bothering pound pairs at the moment.
Overall market sentiment
As in the previous week, the pound might also stay extra sensitive to risk sentiment and counter currency action in the days ahead.
Trade tensions between the U.S. and China are still under the spotlight, so more signs of conflict could keep traders on edge and away from higher-yielding currencies.
Another event worth watching is the Jackson Hole Symposium, which could provide a general idea of what major central bankers and finance officials think about current economic risks.