By Tom Arnold
The last couple of weeks on the currency markets have seen some volatility for the first time in a while, following recent rangebound movements for the major currencies.
At home, weaker than anticipated UK data in the form of GDP and retail sales saw the Pound come under significant pressure, allowing both the Euro and US Dollar to make multi-cent gains.
The biggest influence on the European side seemed to be the EU vaccination program, which having been languishing behind the UK and others, has come right to the fore with vaccination rates now ahead of many other countries. Clearly decreased Covid-risk comes with less fear over lockdowns and therefore more economic positivity, and as such the Euro has been able to stand its ground and in fact make some gains, especially against the weaker Pound.
On the US side, the Dollar was able to make larger gains, particularly against the Pound, as a result of news from the Federal Reserve that their Quantitative Easing program is going to start to be tapered down. QE, which is the system used by central banks to add more liquidity, i.e. print more money, is obviously bad for a currency’s standing as it is essentially diluted, so the Dollar took strength as a result of this news that less dilution was coming.
The week ahead is a busy one with the start of a new month, albeit a shorter one with yesterday’s bank holiday. There is plenty of data due to be released, as below, although not much of significance at home in the UK. Most notably EU CPI Inflation today, EU Unemployment tomorrow, US Trade Balance on Thursday and then one of the monthly ‘biggies’ with US Nonfarm Payrolls on Friday. NFP is the biggest employment data release from the US each month and gives a very strong indication of how the US economy has fared in the previous month, which clearly can give the Dollar a boost or drain away its strength, depending on the result.
With so much going on and having seen the Pound lose some ground recently, it is incredibly important to stay in close contact with your account manager to find out how the markets’ movements are affecting your upcoming currency requirements. Sterling rates are not far off recent highs, so its well worth considering whether securing your currency using a forward contract could be a good idea, or maybe a cost-averaging approach might be the best strategy. Either way stay in close contact with us so we can help you to make the most of the markets.
Tuesday
EU CPI Inflation
Canadian GDP
US Consumer Confidence
Wednesday
Australian GDP
German Retail Sales
EU Manufacturing PMI
EU Unemployment Rate
UK Manufacturing PMI
US Employment Change
US Manufacturing PMI
Thursday
Australian Trade Balance
Swiss GDP
US Trade Balance
US Initial Jobless Claims
US Factory Orders
Friday
Australian Services PMI
EU Services PMI
UK Services PMI
EU Retail Sales
US Nonfarm Payrolls
US Unemployment Rate
US Services PMI