By Nick Harrison
The Pound ended last week flying high against the Euro & US Dollar after the fallout continued from the US Central bank cutting their interest rate and the Bank Of England choosing to keep theirs on hold. The markets had expected the Bank of England’s MPC to repeat their previous months decision to cut the interest rate and were primed for a potential Sterling sell off after previous gains. The resultant market effect saw investors put their money back into the Great British Pound and sell off the US Dollar which, in turn, saw the GBP/USD rate rise to the highest level since February 2022. The story was the same for GBP/EUR and as a result, many of our customers have now secured forward contracts in the knowledge they are booking at the highest level we have seen for over 2 and a half years. Whether or not these favourable levels will continue is of course uncertain, but with our currency consultants keeping an eagle eye on market data releases and other events that caneffect the FX market, we will always help you make an informed decision about how to reduce your currency risk.
Looking ahead to this week – The conflict between Israel and Hezbollah & Hamas seems to be continuing to escalate and these type of global situations can effect the FX market. The US Dollar is seen as a safe haven currency for investors due to it’s dominant economic position and the widespread use of it’s currency in global trade. The introduction of Iran into the conflict could well trigger investors to sell off other assets and put their money into the “greenback” so watch this space as the situation continues to unfold.
There is plenty to digest as far as economic data is concerned and this kicks off today with the release of the German inflation data. Germany is the largest economy in the Eurozone, so plenty of attention will be given to this figure. It previously came in at -0.1% and is forecasted to show a very slight increase to 0.1%. Later today, the head of the US Federal Reserve Chairman Powell is expected to make a speech, so it will be interesting to hear his thoughts on the ongoing US monetary policy.
Inflation continues to be the main subject of economic data on Tuesday as the European year-on-year CPI data is released. The Consumer Price Index is the main inflation indicator as consumer prices account for a majority of overall inflation. Inflation is important to a currency because rising prices lead the central banks to raise interest rates, so again we will likely see plenty of investor interest around this figure.
As we approach the end of the week, the focus shifts to the employment market in the US, culminating in Friday’s Non-Farm Payrolls release. The Non-Farm Payrolls figure is the change in the number of employed people during the previous month, excluding the farming industry. The reason farming is excluded is because it is seasonal, so doesn’t give an accurate reflection of employment. This figure is always seen as a very important data release because strong employment numbers indicate a robust job market thus indicating economic expansion in that country.
So, plenty as always to digest and our Currency Consultants continue to be on hand to help guide you through the market and help you understand how we can save you money on your FX exposure.
Data this week
MONDAY
German Preliminary CPI - All day
US Federal Chairman Powell speaks - 6.55pm
TUESDAY
Flash European CPI - 10am
US ISM Manufacturing - 3pm
US Job Openings - 3pm
WEDNESDAY
ADP Non-Farm Employment change - 1.15pm
THURSDAY
US Unemployment claims - 1.30pm
US ISM Services PMI - 3pm
FRIDAY
US Average earnings, Unemployment rate & 1.30pm
Non-Farm Payrolls