Last Weeks Currency Movements
Last week we saw interest rate announcements for both the UK and EU. They were as expected, but the main news that affected exchange rates was Quantitative Easing.
The Bank of England in a surprise announcements, said it will expand its Quantitative Easing programme - effectively printing yet more money to pump into the economy. It also warned that the timing and strength of a sustained economic recovery was highly uncertain.
The news dragged the pound sterling well below the highs reached earlier in the week and has severely dented any hope of a sustained recover. As I said last week when GBPUSD and GBPEUR hit close to the highest rates all year, spikes like this are often very short lived, and that seems to have been the case here also.
Both the BoE and ECB decisions regarding QE were a surprise, but in the end the news was taken as a negative for sterling and a positive for the euro.
"With regard to the fallout from yesterday, the ECB was maybe just a touch more aggressive than what the market was thinking but not too aggressive, so the market was quite content to buy euros," said Paul Mackel an FX strategist with HSBC.
What next for the pound?
Client's that had a trading facility open with FCG ready to use were able to make a quick decision on last weeks spike, and use tools such as Stop loss orders and forward contracts to make sure they didnt lose out if the market dropped. This enabled many to secure rates close to the best all year. It's impossible to predict which way the pound is likely to move in the coming weeks and months. The pound and Euro are pulling in opposite directions, and it seems that the pound is coming off worse. Given the heavy UK economic data releases this week for the UK, I think it is highly likely the pound may continue to weaken through the week.
I mentioned last week I thought the best we could hope for GBPEUR was 1.12/1.13 - I wasn't far out, and the pound very very briefly even touched 1.14 before coming back down. With the heavy economic focus for the UK this week, I think we may see the pound fall back below 1.10 if the data is poor:
This Weeks Data
Below is a full rundown of what data is being released from all over the world this week. There are lots of different measures which will cause volatility in exchange rates.
The main ones to look for are: US Federal Bank Chairmans Speech today - the press conference will show how the Fed observes the current US economy and the value of USD.
On Tuesday we have various Trade Balance Measures for the US and UK. It shows a balance between exports and imports of goods A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP & USD.
Also on Tuesday we have the GDP Estimate released by the NISR. It's an unofficial report of the UK GDP. This report that comes out a month before the official announce is highly reliable and can influence the UK monetary policy.
Also watch out for the UK unemployment data that will affect Sterlings value, and of course the Bank of England Quarterly inflation report and Mervyn Kings Speech on Wednesday. This will be key to this weeks Sterling exchange rate movements. For more detailed information about this data and how it may affect the cost of your currency purchase, please get in touch.
Monday
UK - BRC Retail Sales
UK - RICS House Price Data
US - Fed Chairman Speech
Tuesday
Ger - Consumer Price Index
UK - DCLG House Prices
UK - Industrial Production
UK - Manufacturing Production
UK - Total Trade Balance
UK - GDP Estimate
US - Monthly Budget Statement
Wednesday
EU - Industrial Production
UK - Claimant Count
UK - Unemployment Rate
UK - Jobless Claims
UK - BoE Quaterly Inflation Report
UK - BoE Governor Speech
US - Import Price Index
US - Retail Sales
Thursday
EU - ECB Monthly Report
US - Jobless Claims
US - Producer Price Index
NZ - Retail Sales
Friday
Ger - Gross Domestic Product
EU - Consumer Price Index
EU - Gross Domestic Product
US - Consumer Price Index
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