After gaining significant ground at the end of last week following the surprise election of a Conservative government, it will be interesting to see if sterling can continue to strengthen in a busy week for UK data releases.

The week starts with the Bank of England (BoE)’s interest rate decision on Monday — this will almost certainly remain unchanged at 0.5 percent as inflation is minimal and wage growth under 2 percent. This will be followed by Tuesday’s industrial production and manufacturing data for March, both of which are expected to show gains, albeit at a marginally slower pace than in the previous month. The week’s main focus will be Wednesday’s quarterly inflation report and the accompanying speech by BoE Gov. Mark Carney plus on the same day there will be a raft of data covering the UK labor market

Euro loses is luster

The euro suffered weakness at the end of last week losing ground against both the US dollar and sterling as US employment data supported the former and the surprise UK election result boosted the latter.

Looking to this week, important euro zone data begins with the Eurogroup meeting on Monday, where the top finance ministers will discuss the bloc’s economic policy and Greece’s latest proposals. Greece could default on a 750 million-pound repayment to the International Monetary Fund (IMF) due on Tuesday, unless their bailout conditions are relaxed. It remains to be seen if the IMF will relent. The situation is uncertain for Greece, and for the euro zone on the whole.

Wednesday sees preliminary growth data released for the euro zone as a whole, which is expected to show a slight improvement, and for individual countries such as Germany, which is forecast to be slightly lower than before. This could potentially see the euro weaken further.

Will the US dollar pass through the 1.55 level against sterling?

Friday’s release of US non-farm employment change and Unemployment Rate data met forecasts — there was no substantial strengthening for the US dollar.

This week sees limited US data releases. On Wednesday we have the release of core retail sales data and then on Thursday we have the unemployment claims on Thursday. More encouraging results are needed if the US currency is to recoup the loses it made at the end of last week against sterling, as the expected uncertainty surrounding the UK General Elections was eroded by a Conservative majority.

Canadian jobs figure declines

The amount of employed people in Canada dropped last month to a new level. Statistics Canada reported that the number of employed people declined by 19,700 in April, when experts had only anticipated a fall of 5,000. This news was shocking after a significant gain the last time around. It will be interesting to see the knock-on effect this will have on the Canadian dollar this week.

The Japanese yen also dropped off on Friday as the Bank of Japan's keenly-awaited latest meeting minutes showed that a majority of the board members want to pursue asset purchases.

— Charles Purdy, is director of Smart Currency Exchange.