Quiet week for data, will it be quiet for sterling?
Sterling ended last week in the same vein it had all week – with mixed movements dependent on data releases or news from other countries. Better-than-expected employment data on Friday from the US pushed sterling lower against the dollar, but the data also triggered a broad sell-off in the euro which meant that sterling was able to recover some of the ground previously lost against the single currency.
The week ahead will see little fundamental UK economic data released. On Tuesday we have the release of BRC retail sales for May which are expected to be back in positive territory. Wednesday sees the release of manufacturing production figures for the month of May, and these are forecast to fall to 0.1% – but investors will be hopeful of a better-than-expected figure, given the previous positive Purchasing Managers’ Index reading from the manufacturing sector. Wednesday will also see Bank of England Governor Mark Carney speaking, and as ever, any new clues regarding future monetary policy will be eagerly awaited. Aside from this, data on industrial and construction output will also be released, although there are likely to have a muted impact.
Greek negotiations remain the largest factor behind the euro
The euro saw a reasonable amount of movement through the day on Friday. It lost ground against the dollar thanks to the positive US Non-farm payroll figures, but the main event of the day was the news that Greece had delayed their debt payment to the IMF – despite the ongoing positivity surrounding the negotiations throughout the week. This did not have as much affect as it could have been though – and the matter will no doubt be discussed at today’s G7 meeting.
Aside from this, we have a relatively quiet week ahead in terms of Eurozone data releases with Germany releasing some industrial production data today, the second estimate of growth figures for the Eurozone tomorrow, no change is expected, and from Wednesday onwards France releases Aprils manufacturing, industrial production and Mays inflation data. Moving forwards it looks as though the Greek debt payment will be the deciding factor on the short term fate of the euro – we will just have to wait and see.
US dollar ends the week on top – will this continue this week?
Friday was a very positive day for the US dollar, gaining over a cent against both sterling and the euro. This main driver behind this was the much better than expected Non-farm payroll figure, which was at a three month high, and the positive news that average hourly earnings in the US increased slightly.
Today we see the last day of the G7 meetings which started on Sunday. This is expected to cover the current state of the world economy, and the continued Greece and Eurozone negotiations. The main focus on this week’s data will be on Wednesday’s retail sales figures. Positive figures will show that the US economy is back on track with the public, and that they are purchasing in line with an increased average earnings. However, previous figures suggest that we will continue to see that people are holding off from buying goods in anticipation of a possible interest rate rise. Friday will see the release of producer inflation which is expected to show an increase in line with expectations and slight growth in consumer confidence.
Norwegian Krone is in disarray
The last five days have seen the Norwegian Krone soar to new heights against all major currency pairs – until terrible year-on-year production figures shattered this dream with a reading of -3.4%. This result was a staggering 5.13% lower than expectation, and caused the Krone to depreciate over 1.8% against sterling across the day. The currency markets will wait with baited breath until Wednesday when the inflation data in Norway is released – and this result could may well define Norway’s short term monetary strategy.