Charles Purdy updates on sterling receiving a boost against the euro
Charles Purdy, director of Smart Currency Exchange updates on sterling receiving a boost against the euro.
Sterling received a boost against the euro on Friday, gaining over a cent, as the European Central Bank President highlighted his worries about Eurozone inflation and the need for extreme measures . However, the comments did also see sterling lose ground against the US dollar.
We should probably expect a quiet week for sterling after a few difficult weeks which has seen the UK currency suffer, largely due to the Inflation Report. The main focus this week will be growth figures out on Wednesday, which will show how well the UK is tracking against growth forecasts for this year. We will also be expecting data indicating how well retailers and wholesalers are doing through consumer spending.
ECB President worried about Eurozone inflation
It’s was a downbeat end to what had been a generally positive week for the euro up until Friday. Early Friday morning saw Mario Draghi, President of the European Central Bank (ECB), addressed an audience at the European Banking Congress in Frankfurt. In the speech Draghi focused on the bloc’s waning inflation levels, and stated that he and the other policy makers would be forced to broaden asset purchasing should the current levels worsen. An increase of asset purchases injects liquidity into the market, and hence devalues a currency. As a result, any decision to hike stimulus measures would trigger a euro sell-off.
Looking forward to this week, there are one or two events to keep an eye on. This morning we have German business climate figures, forecast to be slightly down on last month’s release. Later this week we have a raft of inflation data from across the Eurozone, as well as German unemployment data on Wednesday.
US Dollar still buoyant
The dollar continues to remain in a strong position against sterling and the euro as we saw another positive week for the US economy, with strong data across the board. One instance of this was the Philadelphia Federal Reserve Manufacturing Index, which was at 21 year highs.
This week we look forward to US growth figures – previously out at 2.3% – and durable goods data. The latter is expected to achieve a positive 0.2% compared to a negative reading of -0.2% last month. Any disappointing deviation from these expectations could undermine the US dollar. Thanksgiving is on Thursday so we should expect a quiet end to the week
Higher inflation boosts the Canadian dollar
The Canadian dollar rose to its highest level in November on Friday after a report came out stating that inflation rose faster than initial expectations. This boosted support for the notion that the Bank of Canada will signal that it is closer to raising interest rates.
The Canadian currency rose its most in almost two months as the Consumer Price Index (CPI) jumped 2.4% compared to this time last year – it was also up from September’s reading of 2.1%.
The Canadian currency finished last week up almost a cent against its US counterpart and up well over a cent against the euro after the euro came under pressure following reiteration from European Central Bank (ECB) President Mario Draghi on Friday that the central bank is prepared to act rapidly if low inflation persists.
China’s surprising decision to increase monetary stimulus and ultimately cut its benchmark interest rate to 5.6% has had a knock-on effect on the Australian dollar. Australia is a close trading partner with China and China’s slowing economy is weighing heavily on the Australian currency.
