Will UK data help turn last week’s tide for sterling?
A currency market update from Charles Purdy, director of Smart Currency Exchange.
The release of better-than-expected manufacturing production figures for October on Friday saw sterling recover some of the ground it had lost against the euro on Thursday. Despite this, the British currency struggled against the US dollar thanks to the release of the US non-farm payrolls data which vastly exceeded the forecast level. As a result of this, sterling fell to its lowest level in six-and-a-half months against the US dollar.
A relatively quiet week lies ahead for sterling, with limited UK economic data set to be released. Average earnings figures on Wednesday are expected to show an increase of 3.2% year on year, slightly better than the previous quarters figure. The unemployment rate is expected to be steady at 5.4%. Both figures provide a good indicator for the amount of slack in the UK economy. Aside from this, Bank of England (BoE) governor Mark Carney will speak at a press conference on Thursday, along with other BoE policy makers. He is expected to discuss the recent quarterly inflation report, and any clues regarding interest rate changes will be eagerly awaited by investors – and could prove beneficial to the British currency.
Could positive data this week help the euro to strengthen?
The euro ended the week on a low, struggling across the board – mainly due to the US dollar strengthening thanks to the US non-farm payrolls data release being much better than expected. As the single currency is the second most traded currency in the world, it often moves in the opposite direction to the US dollar.
This week we could see some movement for the euro, as there are a few key data releases due for the Eurozone. On Thursday, industrial production data will be released and this is expected to move back to a positive figure from -0.5% up to 0.1%. The majority of investors will be waiting for the most important release – the quarterly Gross Domestic Product (GDP) figures for the Eurozone, which is forecast to tick up slightly from 0.3% to 0.4%. Any higher than the expected figure could really support the single currency, and erase some of the losses over the last couple of weeks.
The US dollar ends last week on a high – will it be able to hold on?
Following on from Thursday’s strength, Friday was another significant day for the US dollar. The American currency pushed two cents higher against its competitors thanks to dramatically better than expected non-farm payroll data; this came out at 271,000 jobs added compared to the market projection of 180,000. This created the best-selling opportunity since April 2015, and positive sentiment here may well add to the anticipation over a possible US rate hike – which could be introduced as early as December 2015.
A much quieter week expected to follow with little US data out throughout the course of the week, aside from the release of US retail sales data on Friday which are expected to show a slight improvement.
Is the Yuan recovering?
This week the Chinese will release their Consumer Price Index (CPI) and industrial production data on Tuesday and Wednesday respectively. After finishing strongly on Friday, investors will hope that these figures beat expectation and buoy the Yuan recovery.
The Australian Business Confidence is out on Tuesday. There was a great increase between September and October, and it looked as though Australia were addressing a lot of their economic issues. However, since then we have seen things reverse for the Australians so this Business Confidence is expected to be lower this time round. Notably, we will also see their employment data out on Thursday.
