Sterling had a volatile week last week, dropping on Friday after new figures reported the UK trade deficit had increased.
The fall in the pound to euro exchange rate was attributed to the trade deficit and a drop in export sales.
This week looks set to bring more ups and downs for British currency as UK inflation data is released tomorrow.
Labour market data will follow on Wednesday, with information showing wage growth and unemployment showing the current state of UK finances.
Explaining the effects the week ahead could have on the pound, TorFX currency analyst Laura Parsons said: “With no upbeat news to lift the pound, the British currency’s poor run against the euro continued last week, with GBP/EUR dropping to within touching distance of seven-year lows.
“Tomorrow’s UK inflation data is liable to cause significant pound movement.
“Slowing inflation would weigh on BoE rate hike expectations and reduce demand for Sterling, but higher CPI would be pound-positive.”
City economists are forecasting that the CPI rose at an annual rate of 2.7 per cent in July, up from 2.6 per cent in June.
Data released last week from the Office for National Statistics did not help the pound, instead contributing to a drop in Sterling.
The ONS reported the UK’s trade deficit has widened by £2bn to £4.6bn which is the biggest gap in figures since September.
Goods exports fell to just 4.9 per cent in June, the largest drop in a year, whilst imports were up 1.5 per cent.
The trade balance was £12.72 billion, despite being previously suggested to be nearer to £11 billion by analysts.
This, alongside last week’s Bank of England update, has been attributed major catalysts for the weakened exchange rate.
The Bank voted 6-2 against raising the interest rate, which has been kept at the historic low of 0.25 per cent.
For holidaymakers looking to get the best amount of money for their pounds when heading on holiday, it pays to look around during peak season.
Ian Strafford-Taylor, CEO of FairFX advised holidaymakers to plan ahead and buy currency when rates are good.