Good morning. As usual for a Monday, we'll take a detailed look at the past week and future weeks prospects for Sterling exchange rates. In this week’s Report:
• Pound falls to 4 week low vs. Euro
• US Jobs Data affects GBP/USD rates
• EU and UK Interest Rate Decisions this week
• Round up of the week’s data that may affect rates
(For currencies other then GBP, EUR and USD, contact us for a consultation)
Sterling vs. Euro;
Sterling slipped to a four-week low against a broadly supported Euro on Friday, and the UK currency risked more selling as UK services sector PMI rounded off a week of largely dismal data for the UK economy, which has hurt Sterling by bolstering the view that a sluggish recovery will keep UK interest rates low for months to come. The Euro ended the week nearly 2 percent higher versus Sterling, its best weekly performance since October, as the single currency has clawed back from losses in May, when it was sold on rising concerns about Greece's debt problems.
The Pound continues to come under pressure against the Euro which has discovered some strength after some seemingly positive news over the perceived change of stance by Germany over Greek debt restructuring. We saw the Pound tumble earlier last week on a below estimate Purchasing Managers Index figure and weak data pushing the prospect of any Bank of England rate rise further into the future.
This in turn is damaging the Pound, especially against the Euro with a hawkish central bank. We can expect no change to rates or the asset purchase scheme at next weeks MPC meeting and it is likely that we will see more criticism of the Bank of England as they continue to miss their two percent inflation target.
Successful Spanish bond auctions and the news over Greek restructuring lifted the Euro over the last couple of days at the end of last week. Given the fact that Eurozone inflation came in under market estimates, the ECB rate decision and press conference due this week is less important than previous months.
That said, the hawkish tone will probably continue in an effort to force inflation expectations to continue to fall. Eurozone GDP and retail sales are also due, the market expects solid, if not very good figures and therefore the risk remains to the downside if the numbers are below consensus.
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Weekly Economic Data that may affect exchange rates
Below we list the main data released for the week ahead. For a free consultation on how they could affect the cost of your currency requirement, open an account with us today. This is free to do, doesn’t obligate you in any way, and simply gives you access to our market knowledge and commercial exchange rates.
The only UK data of note is the BRC Retail Sales Monitor. As this measures how the high street is performing, it’s a good barometer of overall consumer confidence, and so can impact Sterling. We also have some investor confidence data from the Eurozone today.
There is no data of note from the EU or UK today. Australia has an interest rate decision, and there are some inflation figures from Switzerland. Other than that, measures of economic optimism are released from the USA.
Germany releases a raft of data today including Gross Domestic Product, Trade Balance figures and Industrial Production. There are also GDP figures released for the EU as a whole. These GDP releases are quite important, and if good they will support the case for an interest rate hike in the EU and push GBP/EUR rates down. There is also an interest rate decision from New Zealand today.
After Australia and New Zealand announcing interest rates, today is the turn of the UK and EU. This has been the main driver for exchange rates over the last 3 months, and today’s decisions are some of the most important of the month. We expect no UK change, and the EU to push rates up in July. They could of course raise them today which could cause GBP/EUR to plummet. We also have UK Trade Balance figures today.
An incredibly busy day for UK data. We have: Industrial Production, Producer Price Index, Manufacturing Production and Industrial Production. All of these are released at 09:30am, and will give a very good overview of economic health. Depending on the results, we could see big swings in exchange rates today. Contact FCG prior to these releases to find out how you can protect against possible adverse exchange rate movements.
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Labels: Weekly Market Report