Monday, 16 December 2013

This will be an important week for Sterling...

Monday 16th December 2013
Good afternoon. It's been a quiet start to the week, and since my last post Pound/Euro rates remain in the mid €1.18's, and Pound/Dollar rates around $1.63. This week will be key to whether rates continue dropping as they have in the last week, or resume the trend of the last few months which has seen the Pound rise against other currencies.

Sterling has been one of the currency market's surprises since the summer, having risen consistently over the last 6 months. As I've been explaining over the last few weeks, really impressive economic data has strengthened the Pound, and it's also been helped by the view that interest rates may rise earlier than previously expected. 

This week in my view will be key to the direction Sterling takes over the next month, as we have some key economic data releases including inflation data on Tuesday, and minutes from the Bank of England's Monetary Policy Committee and jobless data on Wednesday, followed by Gross Domestic Product figures on Friday.

So in today's post I'm going to list all the things to look out for which may cause volatility in exchange rates this week. 


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This weeks economic data releases that may affect exchange rates

Monday 16th December

This morning we saw EU Manufacturing and inflation numbers, which were better than expected. This caused the Euro to strengthen and pulled GBP/EUR rates lower. 

This afternoon we have Speech by the European Central Bank president Mario Draghi, which may cause further volatility in Euro rates. 

Tuesday 17th December

Starting in Australian we have the RBA minutes and a speech which may cause changes in GBP/AUD rates. Closer to home, at 09:30am we have a raft of inflation data. This is linked to future interest rate movements so could change Sterling’s value. 

In the Eurozone we also have a raft of inflation numbers in addition to some surveys that look at Economic Sentiment. Over in the States we have more inflation numbers and house price data. 

Wednesday 18th December

This is the key day for the Pound. At 09:30am we have the minutes to the recent decision by the Bank of England to hold interest rates and Quantitative Easing. The minutes show what was discussed and often cause exchange rates to fluctuate. We also have the latest unemployment figures. This is key as future interest rate movements have been linked to a drop in Unemployment figures, so if the number is any lower than 7.6% expect the Pound to make gains, and vice versa. 

The rest of today’s data is from the USA – Building Permits, Mortgage Approvals, an Interest Rate decision, and economic projections from the FED. So all in all, a key day for both GBP/EUR and GBP/USD exchange rates. 

Thursday 19th December

UK data today is Retail Sales. This is seen as a good overall barometer of economic activity so it could be another choppy day for Sterling. There are no EU releases of any significance, but over in the USA in the afternoon we do have Jobless Numbers, and Home Sales figures. 

Friday 20th December

Another very important day for the Pound. We have a measure of consumer confidence, but I think the main event will be the latest Gross Domestic Product figures released at 09:30am. GDP is considered as a broad measure of the UK economic activity. This is key as it will indicate whether the UK recovery is sustained, so could push rates higher or lower depending if the number is higher or lower than the expected +0.8%. 

Elsewhere, GDP numbers from the states are released at 13:30pm, and a Consumer Confidence measure for the Eurozone at 3pm. 

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