By Simon Eastman
Last week saw the pound trade rangebound once again, as few data releases were released to affect the market sentiment.
The main news was the European Central Bank cutting interest rates on Thursday by 25 basis points which was widely expected, but the key point was Chirstine Lagarde’s comments that the ECB was likely done with its current round of policy tightening. With that, the euro gained strength, moving over half a cent against the pound as the press conference continued. With sentiment around currency markets very much influenced by outside factors like the wars on the Middle East and Ukraine, plus the ongoing circus coming out of the White House causing trade war speculation, the rally for the single currency didn’t last long, with both the pound and US dollar making back some of their losses by the close of trade Thursday.
As the week closed on Friday, both the pound and dollar made further gains back as the German industrial production and trade balance figures both posted significantly lower than the forecasters had predicted, as did EU employment change, although gains were cut short as European GDP and retail sales both came out up on predictions at 1.5 percent compared to 1.2 percent and 2.3 percent compared to 1.4 percent respectively.
The main release of the day was the US average earnings and all-important Non-Farm Payrolls (NFP) which all came in above expected, with earnings up 3.9 percent and NFP adding 139,000 new jobs, 9,000 more than expected. This gave the greenback a boost against both the euro and pound although gains were limited by overall sentiment towards the US dollar which has hit its weakest levels in 3 years against the pound – great for any US or UAE investors.
The week ahead provides a bit more meat on the bones for markets to digest with a variety of data releases, the key ones highlighted below:
Tuesday: UK average earnings and unemployment.
Wednesday: US inflation (Consumer Price Index)
Thursday: UK GDP, industrial and manufacturing production, and trade balance. Speeches by ECB members Escriva, Knot, Panetta, Schnabel, De Guindos, Schnabel (again) and Elderson. US producer price index.
Friday: German inflation, UK consumer inflation expectations, EU industrial production and trade balance, US Michigan consumer sentiment index.
With some inflation bearing releases which have a direct impact on interest rates, this week could give traders more to go off over and above the general market sentiment influenced by geopolitical factors and with it, some volatility. To stay abreast of all the factors affecting your upcoming currency purchase, register and keep in touch with your currency consultant here for some friendly guidance to help make your money go further.