Will sterling benefit from UK data releases?
An update from Charles Purdy, director of Smart Currency Exchange.
Sterling weakened against both the euro and US dollar on Friday as the latest estimate of UK growth showed 0.5% economic growth throughout the previous quarter. Sterling fell close to a seven-month low against the US dollar.
A quiet start to this week sees no major data releases from the UK until tomorrow. Results of the latest bank stress test will be available tomorrow morning, and with Bank of England (BoE) governor Mark Carney speaking later in the day we can expect some sterling movement. Alongside this, we will see the release of Purchasing Managers’ Index (PMI) data from the previous month, with the first of these released on Tuesday for the manufacturing industry. Construction sector data will follow on Wednesday, but investors will be eagerly awaiting data from the services industry, with growth in this sector likely to benefit sterling.
ECB in the spotlight as euro struggles
The euro re-approached its recent seven-month lows against the US dollar on Friday, as expectations for a December rate hike for the US comes into real focus. In terms of data it was a better day for the single currency as German consumer confidence data came out slightly better at 9.3, beating the forecast of 9.2. Consumer confidence for the Eurozone was much stronger than expected, coming out at -5.9, which was a vast improvement from the estimated figure of -7.7.
Monday could be a positive start for the euro as retails growth sales data is expected to increase from 0% up to 0.5%. Employment figures from the euro are out on Tuesday but they are expected to remain at 10.8% – any deviation from this could affect the single currency going into a big month.
The main event for the week, however, is the European Central Bank (ECB) press conference on Thursday. We expect clarification from ECB President Mario Draghi on changes to their monetary policy (following his hints in recent weeks) which could spell movement for the euro.
Busy week for the US economy as Yellen takes centre stage
It was a quiet day for the US dollar on Friday, with no data releases. This week, however, we can expect quite a busy week with key data releases due.
Tuesday will see the release of the ISM Manufacturing Purchasing Managers’ Indices (PMIs), which are expected to show continued growth from the recently underperforming sector. The key non-farm employment change figure is released on Friday, preceded on Wednesday by the ADP employment survey and on Thursday by the November initial claims figures. Investors will be watching Friday with a keen eye, as non-farm Employment change figures, which are expected to show a slight decline on the previous month’s data, are a key driver in higher US interest rates.
The spotlight this week will also shine on speeches from Federal Reserve Chair Janet Yellen on Wednesday, as well as a testimony from her on Thursday. This could provide investors with more information regarding a potential interest rate hike before the year-end – any such information could have a significant impact on dollar markets.
Canadian economy the busiest of the bunch
After a rather boring week with limited economic data, this week’s prospects offer a lot more opportunity for movements in other currency markets. The busiest of the bunch is the Canadian economy, which will release its growth figures on Tuesday – these are expected to remain at last month’s levels of 0.1%. On Friday we will see Canadian employment data as well as the trade balance. The employment change is supposed to be negative for the first time since July.
There will be manufacturing data early tomorrow morning from the Chinese economy. This is expected to remain below 50, a position it has been in since September. Results below 50 express contraction within the manufacturing industry, which has been apparent since Chinese stocks crashed in June.