Another bumper week for sterling
A weekly currency market update from Carl Hasty, director of Smart Currency Business.
Friday was another great day for sterling, reaching eight year highs against the Eurozone single currency.
The question of who will be the first to raise interest rates still looms, and sterling certainly appears to be in the running against its US counterpart. The Bank of England (BoE) suggested in the first part of last week that interest rates could be raised sooner than first expected, given the current, relative positivity of the UK economy.
The major UK matters of note this week are: on Tuesday, the release of Junes Public Borrowing figure, a slight reduction is expected, on Wednesday the release of the minutes of the last BoE meeting which are expected to highlight the need to raise interest rates sooner than later and then on Thursday June retails sales data which is expected to show a slight improvement. So plenty of potential for positive news to boost sterling further.
Euro continues its negative run
Friday was a disastrous day for the euro, as it struggled against the majority of other currencies. The single currency had found some support earlier in the week, as Eurozone ministers agreed to give Greece a €7bn bridging loan from a European Union fund so as to keep its finances afloat until the bailout is finally approved.
This morning, the Producer Price Index from Germany is released, a slight fall is predicted. Also we have the Eurozone Current account statement figures which are expected to confirm that overall the Eurozone is on firm footing, it’s just certain southern states which are a problem. On Thursday we expect Consumer Confidence Data from Europe – and this is likely to show a good indication of the general sentiment across the Eurozone. Until the Greek deal is finalised, we expect that the focus will remain on whether the country can come to a long-term deal with its creditors, and get an agreement in place soon. On Friday we have a swathe of Flash Manufacturing Purchasing Manager Indices for July for both the Eurozone and for individual countries. Steady or slight improvements are expected/hoped for with all in positive territory.
US dollar ends week on a low
The dollar finished in a negative position last week, thanks to poor inflation figures that meant that the Consumer Price Index (CPI) data was lower than expected. This was countered by positive Building Permits Data.
This week we have a number of data releases; Junes existing home sales on Wednesday, a slight improvement is forecast, on Thursday initial jobs claims and on Friday Flash Manufacturing Purchasing Manager Indices for July, a slight increase is expected, and new home sales data where a slight fall is predicted. Will be interesting to see if the outcomes are as expected and how investors views on the US dollar and possible interest rate increases change as the week progresses.
Can the Australian dollar turn its fortunes around?
The Australians will be hoping for a change in form this week, after the Australian dollar reached eight-year lows throughout last week. There is hope for positive news from the Consumer Price Index (CPI) data to be released on Wednesday, which is predicted to be 0.6% better than last month. However, it is possible that a turnaround in the Chinese economy may well be required before we notice any significant change in direction for the Australian dollar.
Will Chinas growth return?
Although the Chinese economy is growing, there is some disquiet because Fridays Flash Manufacturing Purchasing Managers Indices for July, although expected to be better than last month, is still expected to be in negative territory, which is indicative of an economy struggling.
Some growth for Canada?
Today sees the release of Canadian Wholesale Sales Data, which is expected to show limited growth. More encouraging than this is the prediction that Thursday’s core Retail Sales Data will be positive this month, after coming out negative last month, and this may improve the currency’s position.
