Sterling fluctuations possible with data releases and EU Referendum fears
A market update from Carl Hasty, director of Smart Currency Business.
Sterling markets looked to steady the ship on Friday, preventing further downward movement against both the euro and US dollar, even as UK manufacturing production slowed by 1.1% throughout March. Following a tough week which saw sterling fall to a November 2013-low against a weighted currency index, investors will be hoping for more positive news to boost the currency this week.
Concern over the effects that an exit from the EU will have on the UK’s economy still dominate market movement, but there are a number of key events this week which could influence investor sentiment. Inflation data will be released on Tuesday and promises to show that consumer inflation has remained steady at 0.3% or may have even increased to 0.4% throughout March. Wednesday will see release of the Bank of England (BoE) credit conditions survey. Despite detailing the inherent risk seen by a number of UK lenders, this is likely to be overlooked due to the BoE’s latest interest rate decision being released on Thursday. Although there is unlikely to be any change in voting pattern, the minutes of their meeting will reveal the committee’s thoughts on monetary policy moving forward.
Indications of Eurozone’s QE programme progress due this week
The euro had a slower day on Friday than on the preceding day, as it remains near enough unchanged against sterling but crept back up to a five-month high against the US dollar. The reason for the movement against the US currency was down to sentiment for the dollar as it remained vulnerable since the minutes of the Federal Reserve’s latest policy meeting confirmed the central bank’s cautious stance on interest rate hikes, which the single currency ultimately benefitted from.
Consumer Price Index (CPI) data – an indicator of inflation – is out on Thursday, and expected to vastly improve from 0.2% up to 1.2%. Investors will be watching closely as many will be expecting the new quantitative easing (QE) programme to start to have a positive effect on the Eurozone’s inflation levels.
US markets digesting Friday’s central bank commentary
There was an absence of significant data releases out on Friday, with two US Federal Reserve members speaking. Central bank member Dudley made a comment regarding interest rates, recommending that a cautious and gradual approach remains appropriate.
We can expect a busy middle of this week, with no data releases on Monday, and no major releases out on Tuesday. On Wednesday we can look forward to retail sales data, which is expected to post its first positive figure for two months, and producer inflation data, which is also expected to post its first positive figure in two months. On Thursday we will see the release of consumer inflation, a key figure that the US Federal Reserve monitors. This is expected to show positivity for the first time in five months.
Abundance of data due from China this week
The Chinese economy has a flurry of data out this week, including inflation figures due today.
Trade balance figures are due on Wednesday, which are expected to be down from last month’s figure, but still show a surplus. This will be followed by growth figures for the first quarter of this year on Friday, which are expected to show another 0.1% decline, to 6.7%, continuing the falling trend from the last 18 months.
