Could positive economic figures this week help sterling recoup some losses?
A currency market update from Carl Hasty, director, Smart Currency Business.
Sterling resumed its downward trajectory on Friday, falling against both the euro and US dollar despite US employment data revealing a much lower than expected increase in job openings in the US throughout April. Sterling ended the week at its weakest against both the euro and US dollar – especially compared to the five-month high the British currency had reached against the US dollar on Tuesday.
A quiet start to the week ahead, with little economic data of interest due for release until we see manufacturing production figures on Wednesday. This is expected to show a 0.4% increase and could inject some optimism into the UK manufacturing industry following last week’s disappointing growth data. Thursday sees the release of the Bank of England (BoE)’s quarterly inflation report alongside their regular interest rate decision. BoE governor Mark Carney will be speaking around these topics, and investors will be eagerly awaiting any insights he may give regarding future monetary policy especially if there is a vote to leave the European Union.
Will we see a rerun of the Greek debt saga?
This week has seen small movement for the euro against the dollar, pushing up at the beginning before sinking back – and then finishing slightly weaker compared to the previous Friday. Similar activity was seen against the pound, with the euro clawing back a cent from the slump we saw in April – but still with no drastic change.
Monday morning sees the release of May’s Sentix Investor Confidence. A higher confidence is predicted here, with an expected rise to 6.2 from 5.7, which suggests a slightly more bullish view of the single currency. We shall also see the finance ministers of the Eurozone and the Euro group president sit down for May’s Euro group meeting this week. Greek debt is on the agenda and with the Greek Parliament just narrowly voting for further austerity measures, amid some nasty looking riots, we will hopefully avoid last year’s saga with Greece receiving additional funds on a timely basis.
Will the US dollar recapture some strength this week?
Friday was an under performing day for the US dollar, as the all-important Non-Farm Employment Change figures failed to meet expectations. This was not wholly unexpected, as the two main indicative releases early last week had fallen short of forecast and so it was thought that Friday’s data may follow that same pattern – and indeed showed a three month low. As a result of this, the US dollar weakened against the majority of currencies.
This week is very much the same as the last, with minimal data releases during the week and the major releases expected on Friday. Today may see the release of US mortgage delinquencies data, which usually would not have a huge market impact, but, on a day of minimal data release, could be enough to cause some market volatility.
Chinese Yuan saw out last week on a high
The Chinese Yuan ended last week positively, gaining on the majority of currencies, including a 0.5% raise against sterling. Yesterday saw the release of their Trade Balance, which was expected to show an extra 50 billion surplus.
Tomorrow we will see the release of their yearly inflation data, for which the Producer Price Index (PPI) figures are expected to improve by another 0.5%.