After a mixed performance last week, Sterling moves will tend to be driven by UK and international political developments with global risk sentiment also important as economic data takes a back seat.
Domestically, the main focus will be on Wednesday’s budget statement with important implications, especially given underlying government vulnerability.
A badly-received budget in the media and within the Conservative Party would trigger fresh speculation surrounding a leadership challenge to Prime Minister May and tend to undermine Sterling sentiment.
Brexit talks will also be an on-going focus as tensions build ahead of the crucial Summit due in mid-December. The UK government is under pressure to make concessions by early December in order to help open dialogue on a future trade arrangement. A more constructive tone would tend to support Sterling.
Collapse of German coalition talks will amplify uncertainty surrounding both the Eurozone outlook and Brexit talks, especially if fresh elections are called. Developments in Berlin will, therefore, be watched closely with significant implications for the Euro and Sterling.
Members of the Bank of England Monetary Policy Committee will testify on Tuesday although, unusually, Governor Carney is not scheduled to take part.
Minutes from November’s Federal Reserve policy meeting will be released on Wednesday with markets continuing to speculate over the 2018 outlook. A December rate hike is fully priced in which will tend to limit the potential impact.
Tax reform and politics will dominate sentiment for much of the time. Thursday’s US Thanksgiving Holiday will trigger a notable dip in liquidity. Although this can lead to very tight ranges, caution is required given the possibility of high volatility.