The UK watches and waits…
A currency market update from Charles Purdy, director of Smart Currency Exchange.
To round off a week that has been focused primarily on the US rate hike (and consequent dollar rally), market interest lay on the potential ‘Brexit’ on Friday. David Cameron hinted that the UK may hold an In-Out vote on membership to the European Union (EU) in 2016, rather than in 2017, as originally anticipated. This move has shaken trader confidence and as a result, sterling finds itself at 0.2% weaker against the euro.
The ongoing outlook for sterling is increased volatility against its major pairings, as a result of outstanding questions on the UK’s relationship with the EU and indecision surrounding a UK interest rate hike, combined with another possible increase in interest rates in the US.
Little data for the euro, but will markets move in line with consumer confidence?
It was a very quiet day for the euro across the board on Friday, as little data was released and markets fell quiet as Christmas week approaches.
We could see some movement in the currency markets this week, as Consumer Confidence data from the Eurozone is released – forecast to improve slightly from -6.1 up to -5.9 – overall, a disappointing figure, but a sign that the European economy is moving in the right direction. Initial Gross Domestic Product (GDP) figures for France come out today, but as this is not a major release, we can in all likelihood expect the markets to quieten down as the seasonal holidays draw near.
USA experiences a welcome lull following the interest rate excitement
It was a quiet day for the US dollar on Friday, with only the Services Manufacturing Purchasing Manager’s Indices released, showing a drop from both previous and expected figures.
With the festive season fast approaching, minimal data will be released this week. What we can look forward to, however, is the Final Gross Domestic Product (GDP) figures that will come out on Tuesday 22nd December. These are expected to be revised down, in addition to the data for Durable Goods Orders, which is also expected to drop slightly in comparison to the previous month.
Holiday season peace and quiet for world currencies
As we approach the festive holidays, a sense of quiet and calm starts to descend on Western and Eastern fronts. In terms of significant data to be released in this time, we expect the New Zealand Trade Balance data late on Wednesday 23 December. The Canadians will also release some of their key figures the following day. After improving outcomes last month, they will hope for much of the same. After falling short of expectations in both their Gross Domestic Product (GDP) figures and Core Retail Sales last month, they too will be hoping for an improvement.