Retail sales figure out in the UK this week
A weekly currency market update from Carl Hasty, director, Smart Currency Business.
A largely quiet end to the week for sterling saw it trade largely sideways against the US dollar, while making marginal gains versus the euro as the Greek government voted in favour of the latest bailout agreement with the nation’s creditors.
Another quiet week for the UK lies ahead on the data front, with only two key figures set for release. Inflation data from July will be the first of these on Tuesday – following on from the Bank of England’s (BoE’s) forecast of reduced inflationary pressure this is set to bear true with a consensus figure of 0% inflation anticipated. Any unexpected jump in this figure could see sterling pick up as talk of interest rates rises intensifies. Aside from this, the latest retail sales figures on Thursday will be the other key data release. This is set to show a 0.2% increase over the previous month, when a surprise decline in sales took investors by surprise. Any further surprises this time around could affect sterling’s performance; otherwise, we may see sterling at the mercy of other currencies.
Greek bailout programme under the Eurozone spotlight
The euro remained almost unchanged against the US dollar on Friday while it weakened off against sterling during the afternoon. Investors were predominantly focusing on upcoming data releases in the form of Eurozone inflation and growth, while the Greek Parliament continued to debate and finalise the conditions of a third bailout plan ahead of a key vote. Greek Prime Minister Alexis Tsipras’s has managed to secure a parliamentary vote on the bailout package, at the expense of criticism from members of his own party. The Eurogroup of finance ministers commenced a meeting to discuss the bailout on Friday.
For this week there is little economic data out from the Eurozone, save flash Purchasing Managers’ Index (PMI) data from Germany and France on Friday. Other than that, the week’s spotlight will shine on Greece. The main focus will be whether it can secure a deal for the third bailout by the 20th August deadline. If a deal is struck then this would be the perfect respite for Greece as it would guarantee funding for the coming months.
Focus on consumer inflation in the US
We saw a slow Friday for the US dollar last week, with various data releases having little effect on the currency. Producer inflation data in the form of a Producer Price Index was slightly better than expected, alongside positive industrial production figures. However the movements were still being dictated by events elsewhere, with euro strength affecting the dollar’s performance.
A quiet start to this week sees a New York state regional manufacturing index, expected to show slight growth from the previous month. Building permits in the US are expected to decline, and housing data to improve. The focus on the week will be on consumer inflation – this is expected to show a slight drop – and US Federal Reserve meeting minutes, where the focus will yet again be on members’ expectations of an interest rate rise. Thursday will see the weekly unemployment claims and existing home sales data, both expected to remain stable. A manufacturing Purchasing Managers’ Index (PMI) on Friday is expected to show growth in the sector, but less so than in the previous month.
Steep curve to continue for Canadian dollar?
Friday was a stagnant day for the Canadian dollar as it ended the day where it started. Poor manufacturing sales data led to a drop in the currency’s performance, but it strengthened again in the afternoon. This week, we see foreign securities purchases data out on Monday, but the more influential releases are out towards the end of the week. It has now been over a month since you could get 0.5 sterling for a Canadian dollar, and the steep curve looks set to continue unless there can be a drastic change in Canada’s fortunes.
