‘Super Thursday’ takes centre stage in the UK
A currency market update from Charles Purdy, director of Smart Currency Exchange.
A third straight month of better-than-expected non-farm payrolls data from the US saw sterling fall to a fresh five-year low against the US dollar on Friday. With investor sentiment largely against sterling, the currency also fell to an 11-month low against the euro with their seemingly being little prospect of a recovery in the short-term.
A quiet start to the week sees no major economic data released from the UK until Tuesday, when manufacturing production is expected to show an increase of 0.1% compared to the previous month. Following poor Purchasing Managers’ Index figures last week, markets will be keen to see any positive data from the UK. Following this, ‘Super Thursday’ will present the next point of interest from the UK, as the Bank of England (BoE) releases its latest interest rate decision. With minutes from this meeting also released, investors will be looking for guidance on the BoE’s monetary policy stance throughout 2016. As such, any surprises could result in significant sterling movement.
Impressive week for the euro
The first week back for the euro was an impressive performance, with the single currency hitting 11-month highs against sterling, and working its way back into a better than position against the US dollar. Friday was no different as it continued to push the bar against sterling. The only momentary blip was caused by impressive non-farm payroll data from the US, which weakened the euro, but these losses were quickly erased as the single currency remained on the charge.
This week we are expecting a quieter time for the euro. The key day for data is Wednesday with Eurozone Industrial Production for November being released and the December consumer price index for France which is forecast to fall slightly. Given how well the euro has been supported recently we wouldn’t expect any major movements for single currency resulting from Eurozone economic data. However, unexpected political events or economic news from other economies still have the potential to affect euro markets.
Busy week for the US economy on the data front
Friday saw sterling weaken against the US dollar as the latter benefitted from better-than-expected Nonfarm Payrolls data. This was despite a narrowing in the UK’s trade deficit, with sterling falling to fresh lows against the US dollar on Friday, due to increasing trepidation over the UK’s impending EU referendum. Risk aversion has continued to bolster safe-haven currencies such as the US dollar as fears about an economic growth slowdown in China, the world’s second largest economy, remain a focus.
The week ahead brings with it notable data releases; starting with the Labour Market Conditions Index today. Tuesday brings JOLTS Job Openings figures, while Wednesday sees Crude Oil Inventories data, news from the Federal Reserve’s Beige Book (one of the documents which helps to inform central bank interest rate decisions), and the Federal Budget Balance. We expect more labour market data on Thursday, in the form of weekly unemployment claims figures.
Friday is also busy on the data front – highlights include retail sales and consumer sentiment figures, as well as the Producer Price Index (PPI) for December.
Strong week for Canadian dollar
The Canadians finished last week strongly on Friday with some encouraging employment change data that was twice as good as expected. As a result of this strong data, the Canadian dollar gained on all major world currencies, barring its North American counterpart.
This week we have the first important data release on Wednesday, when China releases its trade balance figures, and on Thursday, with employment figures from Australia, which have shown progression in the last two months – investors will be hoping that the trend continues.