Tuesday, 3 December 2013

Economic Data and its affect on exchange rates

Tuesday 3rd December 2013 
This morning we saw unemployment numbers from Spain. Despite the market believing an extra 50,000 unemployed people, in fact there were only 2500. This was much better than expected and so strengthened the Euro, bringing GBP/EUR rates lower.

The dip was short lived however, when the UK fired off its Purchasing Managers construction data. This is important as it's a leading indicator of economic health. The number impressed and was better than forecast, and as the chart shows, the dip was reversed and Pound/Euro rates climbed back to €1.21.

 

This clearly illustrates how important economic data is, and how it can affect exchange rates. So below I have listed the remaining data due this week, and my thoughts on how it could affect your currency requirement.

This week’s economic data that could affect exchange rates. 

Tuesday 3rd December

Today’s main data has already been released as outlined above. The rest of today is quiet, with only some minor economic optimism data from the United States.

Wednesday 4th December 

In the UK today we will see the latest Halifax House Prices, but more importantly Purchasing Managers Index services data. Like Monday’s release, it’s an important economic indicator. The forecast is 62.1, so anything above this will cause the Pound to gain, and vice versa.

Also potentially affecting GBP/EUR rates will be today’s Euro data. They fire their first salvo with Services PMI, followed a little later by Retail Sales and a revised GDP figure. These growth figures will be important and could alter rates if the numbers differ from forecast. GDP is expected to be 0.1% and retail sales 0.2%.

Elsewhere Trade Balance data from the States, Home sales and manufacturing data could all affect the GBP/USD rate which is currently $1.64.

Thursday 5th December 

The most important day of the week for Pound/Euro rates. We have the decisions from the Bank of England and European Central Bank on Interest Rates and Quantitative Easing. No change is expected, but both central banks will make statements after the decision, and these statements often hint at future policy which could then immediately affect exchange rates. Look for any hints of rates cuts by the ECB which could cause GBP/EUR to rise. We also have the Autumn statement by the chancellor, which could also affect the Pound if there are any surprises.

US Gross Domestic Product figures and Unemployment numbers will dictate the value of the US Dollar today, forecast at 3.0% and 328k respectively. As usual, numbers above this will cause GBP/USD to fall, numbers lower than this would cause rates to rise.

Friday 6th December 

Quiet in the UK today with Consumer Inflation the only data of note, and I don’t expect it to have much of an impact. Of more importance will be French Trade Balance numbers and German Factory Orders, but GBP/EUR will probably still be moving on the central bank statements from Thursday.

I do expect a volatile day for GBP/USD rates however. We have lots of important numbers from the states: Unemployment, Consumer Sentiment, Earnings and Income data. The most interesting release will be the Non-Farm Payrolls at 13:30pm. These are so difficult to forecast, the actual number is often very different to what’s expected. The forecast at the moment is 180,000 new jobs to have been created. More, GBP/USD will fall… less and expect GBP/USD to rise.

If you would like to discuss your currency requirement, have a free consultation.

Free consultation on your currency requirement

Hopefully today’s post has helped highlight how economic data can affect your exchange rate, and given you some things to look out for this week that might affect the currency you are interested in buying or selling.

I can offer you a free consultation over the telephone, to discuss your particular requirement and discuss the current exchange rates. I can also talk to you about data releases that might affect rates, and the different options you can consider when deciding when to fix your rate.

In addition when you decide to fix a rate, I can provide you a quote to compare with your bank or existing broker. You may be pleasantly surprised how good my rates are.

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Alastair Archbold