Sterling fell at the last hurdle last week – how will this week fare?
Commenting on the latest currency market figures, Charles Purdy, director of Smart Currency Exchange, said:
“Sterling struggled on Friday, giving away the recent gains seen against the US dollar despite weaker-than-expected US non-farm payrolls data.”
“We expect this week to be quiet, with investor focus trained on the US where we will be hearing from Federal Reserve Chair Janet Yellen later in the week when she reports to the Senate banking Committee on Wednesday/Thursday. The main point of interest in the UK will be the latest trade balance figure released on Tuesday.
“Following this, manufacturing production throughout January is likely to have the highest impact, with sterling likely to gain support should this figure beat expectations.”
Euro ends a good week on a low
“The euro ended an impressive week in a muted fashion as it remained almost exactly unchanged against sterling but lower against the US dollar, falling back from the recent three month highs. The small movement against the US dollar was mostly down to positive US jobs data, while disappointing economic reports from the euro had a negative impact on the single currency. From the Eurozone, data earlier on Friday showed that German factory orders fell by 0.7% in December, compared to expectations of 0.5%, after a 1.5% increase the previous month.
“The main release for this week will be Gross Domestic Product (GDP) figures from Germany this Friday which are forecast to remain at 0.3%.”
US dollar up slightly on Friday thanks to good data
“Friday saw plenty of excitement for the dollar with three key economic data releases. Initially there was weakness for the American currency, thanks to the release of Non-Farm Payroll figures below expectation – but this was soon turned around thanks to a fall in unemployment from 5% to 4.9% and above expectation average earnings growth. All in all, the US dollar finished the day around a cent stronger than that morning.
“The early part of this week is expected to be relatively quiet on the dollar front, until Wednesday when the Federal Reserve Chair Janet Yellen is due to testify on the Semi-annual Monetary Policy report before the House Financial Services Committee in Washington DC. This committee is spread across two days and we should expect to see some volatility in the dollar’s performance during the question and answer session. Thursday also brings us the release of US unemployment claims data; this has missed expectations four out of the last five weeks running so investors will be keeping a close eye on these figures. Finally on Friday, we will see preliminary consumer sentiment data released after US retail sales figures; these are expected to grow.”
Quiet week expected ahead
“The week ahead is looking to be rather quiet for the more exotic currencies. Canada will release their building permits on Monday, although the effect of this is expected to be limited. The only notable movement expected this week will be in Australia, when Royal Bank of Australia Governor Stevens speaks later on Thursday.”