‘Super Thursday’ effects continue to influence sterling
A currency market update from Carl Hasty, director, Smart Currency Business.
A poor end to the week saw sterling fall further against the euro, and hit its lowest level since early July against the US dollar. With little significant data released, sterling found itself falling as investors continued to move against the currency following the Bank of England (BoE)’s ‘Super Thursday’ announcements which were less positive than hoped for.
A relatively quiet week lies ahead, with a limited flow of key data sets being released from the UK. Aside from some lagging retail sales data on Tuesday, the first major data is set to be released on Wednesday. Here we will see confirmation of average earnings throughout the past three months, alongside the current unemployment rate. Increasing average earnings have long been considered a key factor in the BoE’s interest rate decision and forecasts show this falling to 2.8% from the previous figure of 3.2%. The employment rate is expected to be steady at 5.6%. Any significant change from the forecast levels is likely to cause movement in the markets.
A busy week for the euro
The euro saw mixed results last week, with the trend continuing on Friday after it strengthened against sterling throughout the day, reaching its highest point in the last two weeks. Early on Friday, Industrial production data from Germany and France turned out in the negative, but this was generally overlooked by investors.
This week is a busy one for the euro. On Tuesday morning we will see ZEW German business confidence data, which is likely to remain the same as last month’s figure of 63.9. Amy deviations from estimates could potentially cause movement for the euro.
Industrial production data for the Eurozone is out on Wednesday; given with last week’s poor figures from France and Germany, this is likely to be a disappointing figure on the whole.
The spotlight this week will shine on Friday morning, however, with growth data due from France, Germany and Italy due, as well as a Eurozone Consumer Price Index (CPI). An indicator of inflation, the CPI figure could also have a significant impact on the euro.
A wide raft of data from the US this week
It was a busy day for the US dollar on Friday, with continued strength following average hourly earnings and unemployment rate data, which turned out as expected. The focus for the US dollar this week was on the non-farm employment change figures, which came out slightly worse than expected – however, with continued sterling weakness following the Bank of England (BoE)’s ‘Super Thursday’, the impact of the non-farm employment change data was muted, with the US dollar continuing to strengthen against sterling.
We can expect another busy week for the US economy this week, with numerous important data releases. Monday starts the week off with US Federal Reserve member Lockhart speaking; he is expected to touch on the possibility of an interest rate rise. On Tuesday and Wednesday respectively we see the release of non-farm productivity and JOLTS job openings data – both expected to show slight increases on the previous month.
However, the focus this week will be on retail sales data which is expected to show much better growth than the previous month’s negative figure. Weekly unemployment claims data is also will also be released, but this is expected to show a stable figure.
Friday will see a basket full of releases with producer inflation figures, as well as industrial production data – both expected to show slight declines. We will also see consumer sentiment data, which is an indicator of consumer spending – this is expected to show a slight increase.
Given that this week will be a busy one for the US economy, there are plenty of opportunities for surprises to occur, which could affect US dollar strength.
Lots of data from China
This is a busy week ahead for China, following inflation data over the weekend. New loans data is out tomorrow, followed by key industrial production figures on Wednesday. The latter is predicted to be just below last year’s figures, and any deviations from this could cause upset in the renminbi’s performance.
The Canadian economy starts off the week in relative quietude, with no data of major significance due until Thursday. The new house pricing index, predicted come out slightly better than last week’s, could have a slight effect on the market. Manufacturing sales figures on Friday will have the biggest effect on Canadian dollar strength, particularly if it falls below expectations for a third month running.
