How will sterling fare this week?
Last week was a very busy week for data releases, not just here but worldwide. This week will be much quieter with the key UK data being released on Wednesday. Firstly there will be the Bank of England inflation report which is likely to highlight that inflationary pressure is low and unemployment continues to outperform. The UK labour market data is expected to show a reduction in unemployment and slight wage growth still below the inflation rate.
So we can probably expect a quieter week for sterling movement when compared to last week which saw sterling hit fourteen month lows against the US dollar, This came on Friday after the UK trade deficit widened to £9.82bn in September from £8.95bn in August, whose figure was revised from a previously estimated deficit of £9.10bn. Analysts had expected the trade deficit to widen to £9.40bn. Against the euro sterling continues to trade in a fairly narrow range seemingly unable to get the ‘energy’ to drive up through the 1.29 level. Events this week are unlikely to help develop the required ‘energy’.
This week’s Eurozone data unlikely to support the euro
After a busy week, Friday was a relatively quiet day for the euro on Friday with no significant data releases bar a couple of monthly figures out of France, which came mainly in line with forecast. Despite this, we saw the single currency log understated gains throughout the day against sterling and the US dollar, suggesting it had been oversold on Thursday following comments by the President of the European Central Bank (ECB), Mario Draghi.
The week ahead looks to be a quieter one than last, with few releases particularly over the next couple of days. On Wednesday we have industrial production data for the Eurozone, and on Friday we have a raft of growth figures from the member states. Expect Friday’s figures to hold the most sway but expectations are set very low as everyone knows the state of the Eurozone economy is dire.
Poor employment data see the US Dollar stutter
The US data releases came to a disappointing end to last week, as one of the final labour market figures came in worse than expected. The ever important non-farm employment change figure came in below expectations, which caused dollar weakness. With the debate over the raising of interest rates still bubbling, this negativity took away some of the support as the overall unemployment rate unexpectedly fell 0.1% to 5.8%.
Meanwhile, US Federal Reserve Chair Janet Yellen stated that all available tools should be used by central banks to deal with low growth and inflation. This week starts slowly, as today holds no major releases. Tomorrow is then a bank holiday in observance of Veterans Day, before Wednesday sees a few smaller events. Oil figures are due, as well as words from a member of the Federal Reserve. Thursday holds the first potentially influential figure, in the shape of the unemployment claims as well as the job openings figure. The week then closes out with some final opportunities for activity. Retail sales figures are due first, as well as import prices, before the final release arrives, in the shape of the consumer sentiment from the University of Michigan.
Japanese yen still weakening
The Japanese yen has lost significant amount of ground on the US Dollar – almost 50% on the dollar in the last three years. Taro Aso, head the ministry of finance, said that an increase in sales tax for Japan will be happening as planned. The logic being behind this is that the economy is very unlikely to further worsen in the next year. Looking forward to this week, we have consumer confidence data out of Japan, which is unlikely to do much better, with the previous figure coming in at 39.9.
The Canadian dollar had a great end to the week on Friday as unemployment data came out better than expected at 6.5%, when it was forecast at 6.8%. We saw the dollar strengthen from 1.8110 to 1.7940 in a matter of minutes against sterling as a whole raft of impressive data was released, including the net jobs figure at 43,100 in comparison to the forecast that it would lose 5,000 jobs. Next week should be a fairly quiet week for the Canadian dollar, with the New Housing Index out on Thursday the only data release of note.
