By Nick Harrison
Economic data has been quite thin on the ground this week, so we have been at the mercy of longer-term investor sentiment rather than data driven activity.
The week started on Tuesday with a worse than expected inflation figure in Germany which did little to affect the FX market. In fact, the Euro has seen a strong week as it jumped up a whole cent against the US Dollar and tested the lower range we saw last week against Sterling. Possibly the reason behind the Euro’s strength has been a show of weakness in the US economy as the States posted the worst PMI Services data for 3 months on Wednesday as new orders and inventories fell. Unemployment claims in the US on Thursday also came in worse than expected so it seems, for the time being, the Dollar remains under pressure.
In the UK, Manufacturing, Money Supply, Mortgage Approvals and Net Lending all showed encouraging signs on Tuesday – As we have recently explained though, the Bank of England seem to be on the edge of interest rate cuts and the markets are primed to see which of the US, UK or Eurozone will jump first to loosen monetary policy, therein weakening that currency. Next week will, again, see little economic data released in the UK with next Friday’s GDP figure the sole announcement that could move the market.
This week’s big data though is released at 1.30pm today and it is the US Non-Farm Payrolls that will potentially move the markets. This release is very important to the FX market as job creation is a leading indicator of US consumer spending which, in turn, accounts for a majority of overall economic activity. The number is expected to show an increase of 212,000 US jobs compared to the previous number of 275,000. Any big movement outside of the forecast could easily see a sudden change in investor sentiment, so beware of some potential volatility in the market later today.
Next week sees some big bangers as far as economic data is concerned with major inflation figures being released in the US and the European Central Bank announcing their interest rate decision on Thursday.
So, a potentially volatile end to this week and some important data releases next week could impact your FX costs. Do reach out to our team here who will guide you through the markets and explain how we can help reduce this risk during volatile trading times.
Next week’s major data releases are below :-
MONDAY
4.30pm UK MPC member Breeden speaks
WEDNESDAY
1.30pm US CPI (Inflation) figures released
7pm US Central Bank minutes released
THURSDAY
1.15pm ECB announce their interest rate decision
1.30pm US Producer Price & Unemployment claims data released
1.45pm ECB statement
FRIDAY
7am UK GDP m/m figure released
3pm US Consumer Sentiment