Sterling continues its downward trend against the US dollar
Currency update from Charles Purdy, director of Smart Currency Exchange.
Sterling continues its downward trend against the US dollar
A lack of data on Friday meant that sterling was at risk from announcements outside of the UK. The morning’s European growth figures did little to move sterling against the euro as all eyes were on US labour figures in the afternoon. The pound was hit badly and recorded new yearly lows against the dollar as non-farm payrolls massively outperformed market expectations.
A relatively quiet week lies ahead for sterling, with little influential data set to be released. Manufacturing production figures on Tuesday look set to have the most potential to move the markets, with last week’s strong growth in the sector heightening the possibility of this figure coming out ahead of forecast levels for the second month in a row. The only other major event of the week will be the National Institute of Economic and Social Research estimate of economic growth over the past three months.
A lack of data this week may be good for the euro
Friday was a relatively uneventful day for the euro, with any movements largely being triggered by events elsewhere. It took some strength in the early session following the release of German factory orders data, but any gains were given back in the afternoon following US non-farm payroll figures. US dollar strength saw the euro drop off against its American counterpart, and ground was also lost against sterling. Historically, if the US dollar strengthens significantly we see the euro weaken against its other peers, as traders sell off euros to buy up a strengthening dollar.
This week is a relatively quiet one on the data front, with industrial production figures from across the European bloc being the main fundamentals to keep an eye on.
Good data buoys the US Dollar
Last week proved to be a very strong week for the US dollar in terms of data. Growth in both the manufacturing and services Purchasing Managers’ Indices (PMIs) contributed to strength seen at the start of the week. But the biggest gains were seen on Friday, with much better than expected non-farm employment data reporting 321,000 new jobs created, compared to an expected figure of 231,000. This is an astronomical figure for the US, and the highest it has been since June 2010. This highlights that the US economy is moving in the right direction in creating new jobs which will help the US economy grow in 2015. We saw the US dollar gain on Friday a cent against sterling, as well as a cent against the euro.
The employment data coupled with increasing average earnings figures also increases the likelihood of an interest rate hike in 2015.
A quieter start of the week is expected from the US. We will look forward to core US retail sales out on Thursday, which has been a unpredictable figure in the past few months. Also released will be the weekly unemployment claims data, which is typically used more as an indicator of how the non-farm payroll data trends. We also have inflation and consumer sentiment data out on Friday.
Mixed Canadian economic data
The Canadian dollar had a day full of data, with the main news of unemployment coming out at 6.6% as forecast. There was, however, disappointing jobs data, with the economy losing 10,700 jobs – this was forecast at 5,000. Trade balance came out at $99m for October in comparison to $300m in September. Today’s Canadian data has proven that dropping oil prices and employment data that has been below average on the whole have put Canada’s economy under pressure.
