Important week ahead for sterling
A currency market update from Charles Purdy, director of Smart Currency Exchange.
A relatively quiet end to the week for sterling saw it claw back a little bit of the ground lost earlier in the week against the euro, whilst largely trading sideways against the US dollar as the US non-farm payrolls data released on Friday was largely in line with expectations.
An important week for sterling kicks off with the release of housing inflation data this morning. With a bumper release last month, further strength in this sector could help sterling recover some of the ground lost last week. Manufacturing production figures are the next figures; these are released tomorrow and we expect to see a contraction in this figure showing two consecutive months of modest growth. However, the so-called “Super Thursday” will likely prove the most important day for sterling as we receive the latest interest rate decision along with minutes from the Bank of England (BoE)’s latest monetary policy meeting. Following on from recent cautionary comments from BoE Governor Mark Carney, investors will be listening for any indication that an interest rate hike has been pushed back further into 2016.
Quieter week for the euro expected after busy beginning of the month
Friday was a quiet end to a turbulent week for the euro. The single currency made massive gains on Thursday; amazingly this was the second most volatile day for the currency since inception. The strength was largely down to European Central Bank (ECB) President Mario Draghi announcing that the pace of the current quantitative easing programme is to remain unchanged at €60bn per month. This surprised most investors, who had expected that the central bank would increase this programme. The only other major piece of news was German factory orders, which increased to 1.8% in October from 1.2%.
The euro can expect a quieter week this week, with the major bit of data expected the revised third quarter Gross Domestic Product figures from the Eurozone and consumer price index from Germany on Friday.
Yellen confirmed that an interest rate hike is data dependent – will this week’s figures help this?
It was a positive day for the US dollar on Friday, with Average Hourly Earnings released as expected and better than expected non-farm employment change. With US Federal Chair Yellen earlier in the week confirming an interest rate rise is data dependant, investors will be keen to see how much of an effect Friday’s releases have on their decision on the 16th of this month.
We expect a quiet start to the week, with no major data releases until Thursday – when the weekly labour data due to post yet another stable figure. The spotlight will be on Friday, and the release of retails sales and producer inflation both expected to post better than the previous month’s results. With Yellen’s previous comments regarding data, the US will be hoping to see most major data releases posting good figures.
Big data releases for Switzerland and Canada this week
This week we see some important data from Switzerland on Thursday. At 8.30am they release a flurry of data, including their central interest (Libor) rate and the SNB Monetary Policy Assessment; the Libor rate is expected to remain at-0.75% as it has since last January.
Canada however, will release major data tomorrow. At 1.30pm they release their building permits; this missed expectation spectacularly last time so they will be hoping for more positive data tomorrow.
