A positive outlook for sterling
Charles Purdy, director of Smart Currency Exchange updates on the weekly currency market.
A positive end to the week for sterling saw it hold on to its recent gains, with investors still in a positive mood following the Bank of England (BoE)’s quarterly inflation report.
An important start to the week sees the latest inflation figure from the UK released on Tuesday. With the BoE last week saying that we could see inflation fall into negative territory, a fall in the inflation rate is expected. Additionally, if we do still see moderate inflation, markets may react favourably.
This week also sees the release of minutes from the latest meeting of the BoE monetary policy committee on Wednesday. These will be assessed for any hints as to when they expect to raise interest rates, although it is expected that all nine members voted to keep rates on hold. Alongside this, we will see average earnings for the past three months released, which are expected to show continued strong growth of 1.7%. A relatively quiet end to the week will round up with retail sales data for January from the UK which are expected to show a fall from December but strong growth for the last year.
Euro still struggling
The euro continues to weaken against sterling. Following a difficult few weeks, it may still worsen for the single currency. Last week’s developments with Greece and European Union officials ended without an agreement on Wednesday, though both sides said there was still hope for a deal, and further talks are due to be held today.
Greece’s current bailout is due to expire on the 28th February – the new Greek government is very much against extending it, which is fuelling fears over a conflict with its creditors – this could trigger the country’s exit from the eurozone.
Good news came at the end of the week in the form of the German consumer confidence index, which rose to a 13-year high of 9.3 for February, providing a glimmer of hope for the in the coming weeks. Business confidence for Germany is likely to remain high this week, and with the purchasing managers Index (PMI) from Europe out on Friday, this is forecast to strengthen compared to last month’s figure.
A more turbulent time ahead for the US Dollar?
After a quiet few weeks for the US Dollar, we could possibly see a more turbulent week. Friday finished with the release of the Consumer Sentiment data, which is a leading indicator for consumer confidence, which came out slightly worse than expected. This fuelled the recent US weakness that we have seen over the past week.
Today is a US Bank holiday, so no data releases are expected. Later in the week, along with the usual Federal Reserve members’ speeches, we will see the release of Building Permit and Inflation data. With inflation pegged to remain low for the short-term, we could expect once again a weak figure as a result. The all-important Federal Open Market Committee (FOMC) meeting minutes are also released on Wednesday, which will provide an insight into possible interest rate rises for the rest of 2015. We will also see the weekly unemployment claims data released on Wednesday, which has recently been weak for the US. In contrast, and perhaps more encouragingly, the release of the Manufacturing Purchasing Managers Index (PMI), which is expected to show slight growth in the sector.
Canadian dollar finishes on a week-long high
Friday saw the Canadian dollar finish the week strongly, as it jumped up against its US counterpart. Statistics Canada reported that manufacturing sales rose by 1.7% in December, coming out way above the initial expectation of a 0.9% fall. November’s number was revised to a 1.3% decline from a previously estimated 1.4% drop.
The Australian dollar gained strength on Friday following central bank Governor Glenn Stevens’ acknowledgement that spurring demand in the Australia’s economy would take a lot of work, thereby indirectly suggesting that the government step up its spending.
