Good morning. Last week was an extremely quiet week in terms of market movement on the GBP/EUR currency pair, with the market closing on Friday evening a matter of pips from where it opened the week on Monday morning. It seems that the Pound is consolidating its gains having recently made a sharp recovery from what many technical analysts, with hindsight, consider to be a sustained period where it was undervalued compared to its European counter-part.
Sterling did gain marginally early in the week but those gains were cancelled out following the publishing of this month’s PMI (Purchasing Managers Index). The release, which captures an overview of the conditions of sales and employment came out at 53.1, significantly lower than the previous figure of 54.8 and the expectation of 54.4.
The most notable release of the week, the UK and Eurozone interest rate decisions also provided little to give direction to the stagnant pairing, with both the Bank of England and the European Central Bank keeping rates on hold at 0.5% and 1% respectively.
Looking to this week, focus will turn early in the week to German and UK trade balance figures to be released on Monday and Tuesday respectively with comparatively better figures from either expected to benefit either Sterling or the Euro. Another release to watch closely will be Wednesdays UK unemployment figures with any announcement that the workforce is growing expected to further boost the Pound.
While keeping a close eye on all these releases can be difficult for those who do not work in the markets everyday, some data is of particular significance and the potential effects should not be ignored.
On Friday we have the Release of Euro GDP, (Gross Domestic Product is a measure of the total value of all goods and services produced by the Eurozone. The GDP is considered as a broad measure of the Eurozone economic activity and health. A rising trend has a positive effect on the EUR, while a falling trend is seen as negative.)
Given the potential volatility that these figures could cause in either direction, staying in touch with your FCG account manager, who can keep you up to date with the latest estimates and help you to determine the likely outcomes based on this to ensure that you make the most informed decision possible when securing your exchange rate, will be crucial. Make an enquiry today if you haven't already contacted us.
Those with a requirement to buy or sell Euros would be wise to pay close attention to all data releases that could affect the cost of your purchase, a full and concise round up of these can be found in ‘This Week’s Data’ section below.
This Weeks Data
Below as usual we list the main fundamental data releases for the UK. Last weeks movements in the exchange rates demonstrated the importance of economic data releases on the currency markets. At the beginning of the week, we listed the known figures and the date of publication. Analysts already forecasted what the results would be, and investor’s bought/sold currency on the basis of these estimates.
When the actual figures are better or worse than expected, the markets correct as a result. A good example is last weeks run of poor UK data that was worse than expected and has caused exchange rates to drop. Remember, markets often move more on rumour than fact.
Contact us today for a free consultation on how these data releases may affect the cost of your currency purchase.
Monday
A fairly quiet day for data releases. Trade balance data from Germany is released this morning. A positive value shows a trade surplus, while a negative value shows a trade deficit. It is an event that generates some volatility for the EUR. Later in the day UK RICS House Prices will give an indication of the health of the housing market in the UK.
Tuesday
Consumer Prices from Germany give an idea of EU inflation and therefore future interest rate movements. For the UK, Trade Balance figures are the main release of the day. From the US we have an interest rate decision, although rates will probably be left on hold.
Wednesday
Data from the UK will show the unemployment rate, and jobless claims. There is also an inflation report from the Bank of England. Following the EU and UK Trade balance figures earlier in the week today we see US trade balance.
Thursday
Unemployment from Australia starts the day. Later in the morning from the EU we see a monthly report from the European Central bank, along with Industrial production. It shows the volume of production of Industries such as factories and manufacturing. Up trend is regarded as inflationary which may anticipate interest rates to rise. The US release unemployment data at lunchtime.
Friday
From the EU Gross Domestic Product features from Germany will be closely watched as Germany is the biggest economy in the EU. We also have GDP data from the EU as a whole, and so we expect volatility today for GBP/EUR rates depending on the results. From the US, watch for Retail Sales and inflation data that may cause GBP/USD rates to be volatile.
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Labels: Weekly Currency Report, Weeks Economic Data