GBP searching for direction

The Pound grappled with uncertainty as the week commenced due to a dearth of UK economic updates. Concurrently, heightened risk appetite prompted the Pound, which is increasingly sensitive to risk, to fluctuate widely against other currencies. It weakened against riskier counterparts but strengthened against safe-haven currencies.

On Tuesday, Sterling experienced a similar lack of direction, as a lack of UK data kept the GBP adrift against its main counterparts. Market risk factors remained the primary driver behind GBP fluctuations during the session.

Wednesday's continued absence of significant macroeconomic updates led to Sterling's decline against the US Dollar, with pessimistic trading conditions dampening demand for the riskier currency.

During Thursday's trading session, the Pound made modest gains against certain counterparts, buoyed by remarks from Bank of England policymaker Megan Greene, who advocated against interest rate reductions.

Greene asserted that persistent UK inflation might prompt the central bank to lean towards a more restrictive monetary policy in the upcoming months, which initially boosted Sterling. Nonetheless, as the session unfolded, GBP ultimately weakened against its key counterparts.

Friday brought the release of the UK's most recent GDP report, revealing that the economy grew less than expected, with a 0.1% expansion in February. Although economists acknowledged this as a sign of recovery from last year's technical recession, the underwhelming figure underscored continued economic vulnerability, resulting in the Pound remaining rangebound as the week concluded.

Moving forward, the key factor likely to influence the movement of the pound exchange rate this week is the upcoming release of UK inflation data for March.

With expectations for a cooling in both UK headline and core inflation figures, there's a potential for Sterling to be shaken by heightened speculation regarding a possible rate cut by the Bank of England.

Prior to that, the UK will unveil its most recent jobs data. If February's unemployment rate is projected to increase, it might weaken GBP exchange rates. Nevertheless, this could be counterbalanced by anticipated growth in wage levels.

‍