Monday, 31 March 2014

Will exchange rates go up or down this week?

Monday 31st March 2014 
We have seen the Pound slide off a little at the start of the trading week, with GBP/EUR falling from €1.21 down to €1.2050, a drop of around 0.4%. This was mainly due to consumer credit being lower than expected, reflecting a lack of confidence surrounding the UK economy. This afternoon however it's bounced back to where we started around the €1.21 level, so all in all no change.

There are lots of economic data releases this week that could affect exchange rates, so as usual for a Monday I am going to list what I think are the most important releases, and analyse how this could affect the currency markets. 

If you need to convert one currency to another, on a bank to bank basis for volumes between £5k and £10m, then read on, as my thoughts below can help you decide when may be the best time to fix your rate. Get in touch if you would like a quote, or to discuss your currency requirement with me in detail.

This weeks economic data releases...

Monday 31st March 2014 

As I’ve already outlined above, the only UK data was slightly disappointing, taking the steam out of Sterling’s recovery. We also saw some EU inflation data this morning, which was roughly in line with expectations. Interestingly the BBC pitch this as terrible news, meaning a possible rate cut by the ECB - if that were the case, Pound/Euro would have gone up, not down.

The only other thing of interest today is a speech by Bank of England governor Mark Carney. His comments have recently had a big impact on the value of the Pound. In short if he is positive about the economy, Sterling may gain strength. I think it’s more likely he will have quite a cautionary tone, mirroring the BoE’s recent comments about being concerned about the Pound getting to much stronger, so I think a drop is more likely. 

Tuesday 1st April 2014 

We’ll start in Australia today, and early in the morning we have their interest rate decision. I think it’s very likely they will leave it at 2.5%. GBP/AUD rates have fallen recently due to more demand for their raw materials from China. 

UK Manufacturing figures are released at 09:30 and I expect a reading of 56.9. Higher means exchange rates could rise accordingly and vice versa. 

German and EU Unemployment figures are released from Europe today, so those looking to buy Euros need poor numbers here, which would weaken the Euro and make it cheaper to buy. We also have unemployment from the United States, along with some manufacturing numbers. 

Wednesday 2nd April 2014 

Some construction data from the UK today to follow yesterday’s manufacturing. The forecast is 63.00 and as always, a differing result could affect Sterling exchange rates. 

The main event today however is EU GDP, which will show how their economy is growing. Their last released showed very small growth of 0.1%. Any better, expect GBP/EUR rates to drop away due to a stronger Euro. 

Thursday 3rd April 2014 

As always for the first Thursday in the month, the European Central Bank announces its interest rate, which is 99.9% likely to stay at 0.25%. Euro buyers or sellers should pay close attention to the press conference afterwards by President Mario Draghi. He may hint at a negative deposit rate – if he does, I think Pound/Euro will march upwards. The EU also released Retail Sales figures today, which are a good barometer of overall economic activity. 

Elsewhere, Australian Trade Balance figures and Retail Sales are announced, and over in the States we have Trade Balance numbers and Jobless numbers. 

Friday 4th April 2014 

The only data of interest today is stateside – Earnings and Unemployment, along with non-farm payrolls. Non-farms is always interesting, and it announces how many new jobs have been created, excluding the farming sector (because it’s seasonal). It’s notoriously difficult to forecast, and the consensus is that 196,000 new jobs will have been created. 

It’s likely the actual number will differ significantly from that – lower, then GBP/USD will rise, higher, and it will fall. Personally I think it will be quite a bit lower, closer to 130,000. We will see! 

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