Lots of UK data, will it help sterling build on recent strength?
A weekly currency market update from Charles Purdy, director of Smart Currency Exchange.
Sterling had a good week last week, gaining ground against most other currencies, but this was on the back of news from elsewhere as UK data releases were limited.
This week is very different as we have the three sets of November UK Purchasing Managers Indices; Manufacturing today, Construction tomorrow and Services on Wednesday. Expectations are for the first two to show a slight decline and the final one, and the key one given its importance to the UK economy, a slight improvement. We also have the Bank of England’s second “Super Thursday” where we see the release of the latest interest rate decision, no change expected, the meeting minutes and the final inflation report for the year.
So lots of data to affect sterling, plus lots of news from elsewhere, so we could be in for another “interesting” week for sterling.
Manufacturing data under the Eurozone spotlight
Friday was a mixed day for the euro with Eurostat – the statistical body of the European Union – reporting on Friday that the annual rate of inflation was up slightly to 0% in September, compared to August’s figure of -0.1%. Data also showed that the unemployment rate for the Eurozone improved to 10.8% last month from 11% in August (the predictions were for the rate to remain at 11.0% in September). All of this positive news did not stop the euro struggling against sterling but helped it make a positive impact against the US dollar.
It is an important start for the single currency this morning, with manufacturing Purchasing Managers’ Index (PMI) figures for the Eurozone and France released. Although these are forecast to remain flat, any deviations from expectations could cause movements in euro markets. Another key release will be German manufacturing orders on Thursday, which is expected to improve significantly from last month’s figure of -1.8%, up to 1%.
Busy week for US dollar – will it improve upon last Friday’s performance?
It was a disappointing day for the US dollar on Friday. Month-end flows and poor data releases pushed the US currency to retrace its gains from earlier in the week. Personal Spending and Personal Income just barely showed growth; both figures were also just short of expectations, which led to the US dollar weakening a cent against both sterling and euro.
We can look forward to yet another busy week for the US dollar. Monday will see the release of the ISM manufacturing Purchasing Managers’ Index (PMI) data, which is expected to show very limited growth. Wednesday will see the release of trade balance, the non-manufacturing PMI figures and the ADP non-farm employment change which is used as an indicator for the main release on Friday. The main focus though this week will be on the non-farm employment change on Friday which is expected to show strong growth in the employment sector.
Stormy times ahead for the Australian economy
It’s a busy week ahead for the Australian economy, with a flurry of pivotal data out in the coming week. On Tuesday we see the release of their cash rate and the central bank rate statement, with the country’s cash rate expected to stay at 2%. The retail sales and trade balance results will be published on Wednesday, with the trade balance expected to be slightly better than last month’s. Australia will be desperate for positive results this week as the effect of the ‘El Nino’ drought are already being felt and could cause the slowest growth for its economy in 24 years.
