Busy week for sterling and the UK economy – even despite Greece
A weekly currency market update from Carl Hasty, director of Smart Currency Business
A mixed end to last week saw sterling fall against both the euro and US dollar, although it did hit a fresh 6-year high against the Australian dollar thanks to lower than expected Australian retail sales. Against expectations, given the “No” vote in Greece, sterling has opened only slightly higher against the euro first thing this morning.
We do expect to see the reaction to the Greek vote dominate the market focus this week – but there are a number of other releases from the UK which may be of interest. Tomorrow sees the release of manufacturing production figures for the month of June; following a surprise contraction throughout May, investors expect to see this figure to show a 0.2% improvement this time around. On Wednesday we have this government’s first Budget presented to parliament – and this could may well contain a number of factors that are of interest to investors, and any surprises could see sterling movement. Thursday then sees the release of the latest interest rate decision from the Bank of England (BoE), although this is likely to pass without incident as there has been no recent indication that a rate hike is being considered or imminent.
Could this end the Greece conversation?
The Greeks have voted “No” to yet more austerity – probably not unreasonable given 50% youth unemployment and 25% overall unemployment – but their government costs are still bloated so reform is required. The initial reaction has been somewhat muted with euro weakness much less than expected but how Greece and its creditors will sort out this mess over the coming few days is anyone’s guess, although the fallout from a Greek exit given its uncertainty is probably, if possible, best avoided.
Following this, there is very little data out this week that will carry any further clout. French and German trade balances will be released midweek, along with Italian industrial production on Friday.
Another busy week for the US dollar expected
There was not much movement for the US dollar on Friday, as America celebrated the 4th July bank holiday. This week brings a wealth of data from the US – beginning today with the non-manufacturing PMI. Last month’s results of this failed to hit target, so investors will be hoping for better fortunes this time round. The Trade balance tomorrow and the Unemployment claims on Thursday will also have significant effect on the dollar, and a mixed set of results could spell a volatile week for the American currency.
Could the Australian dollar fall further this week?
We expect a busy week ahead for the Australian dollar, with the Interest rate decision and employment change figures being announced. With the currency already weakening and interest rates already cut, further losses could be seen.
Uncertainty also continues to surround the Canadian dollar with a negative week expected. A slight drop is expected today, thanks to the Ivey Purchase managers’ index (a leading economic indicator) – and this follows weaker than expected employment change on Friday.