Sterling gains across the board
A positive week for sterling saw it gain ground across the board, as fears over the uncertain result of the UK general election took a back seat to the Eurogroup meetings and poor economic data from the US. Sterling was particularly impressive against the US dollar hitting a fresh one-month high against the US dollar. European Union finance ministers openly vented their frustration towards the Greek government’s unwillingness to negotiate and at one stage sterling was able to push close to its recent one-month high against the euro before slipping back.
The week ahead sees a low volume of data releases from the UK, although each of these does promise to carry a lot of weight. Preliminary economic growth data for the first quarter will be released on Tuesday, and is expected to demonstrate further healthy growth for the UK. Following this, we will see mortgage approvals and consumer confidence data released ahead of the first of this month’s Purchasing Managers’ Index (PMI) figures being released on Friday from the manufacturing industry. Expectations are for a small improvement from last month and manufacturing continuing to be in an expansion phase.
Euro holding on
Despite the on-going Greek debt problem, the euro had a reasonable week last week and even gained ground against the US dollar. The IFO German business sentiment data released on Friday was optimistic helping the currency’s positive trend.
This week should be an interesting one; the majority of the European market are certainly keeping a close eye on Greece, whether its current bailout crisis is under control or an exit from the euro is likely. The situation remains on-going and uncertain, so if Greek bailout talks should take a dramatic turn for the worse over the coming weeks the euro can expect to pay with a heavy fall.
On Thursday we have Eurozone inflation and employment data with the unemployment rate expected to show a slight reduction to 11.2%.
US Dollar under pressure
The US dollar had a difficult week last week and weakened further against sterling and the euro on Friday as core durable goods orders data released showed a contraction in core orders being placed, although the overall figure had grown more than expected.
It will be interesting to see if the US dollar continues to weaken against its peers this week. Growth figures to be released on Wednesday for the first quarter are expected to highlight a tough winter and be close to 1%, much less than the 2.2% for the last quarter of 2014. We also have the latest Federal Reserve meeting the same day. It is a fairly low key meeting as there is no press conference following the meeting or new economic forecasts and the expectation is that there will be no change in policy. The weekly unemployment claims for the US is due Thursday, with expectations for another high figure – which could build a negative view for the Non-farm employment figures due next week. The ISM Manufacturing Purchase Managers’ Index will be hoping for a positive sign, especially with the US fighting against the current slowdown.
Will Sweden cut their interest rates even more?
There are interest rate decisions from Sweden and New Zealand’s central banks this week. Sweden is expected to increase their negative interest rates to -0.35% and New Zealand to keep theirs on hold.
For Japan we have labour and inflation data released so it will be interesting how effective their programme of quantitative easing has been over the last month.
