By Tom Arnold
Over the last week we have seen the Pound make significant gains against both its major compatriots; the Euro and the US Dollar. Against the Euro it has managed to hit highs not seen since July, and against the US Dollar it has done even better, hitting two year highs. The Pound’s strength is being driven largely by the release a couple of weeks ago of UK inflation numbers, which showed a tick up in the inflation rate. Higher inflation puts pressure on the Bank of England to hold off on any further interest rate cuts, and with higher interest rates a driver of currency strength, so Sterling profited.
On the Euro side, some weaker than anticipated data later last week lent on the single currency, already under pressure from expectations of an ECB interest rate cut in mid-September. The US Dollar suffered a similar, albeit exaggerated, weakening after the chairman of the Federal Reserve Jay Powell, said last week that he expects the FED to cut interest rates in the near future, saying “the time has come for policy to adjust”. With such a direct suggestion of action, the US Dollar has dropped significantly as large-scale investors lose interest in the Greenback.
The week ahead is a busy one with plenty of data of note, most notably GDP and Inflation numbers from various of the major zones. There is however an almost complete lack of UK data, which could well leave the Pound vulnerable if other zones receive anything of a boost from their data releases.
Tuesday
German GDP
German Consumer Confidence
US Consumer Confidence
Wednesday
Australian CPI Inflation
French Consumer Confidence
Thursday
EU Consumer Confidence
German CPI Inflation
US Jobless Claims
US GDP
Friday
Australian Retail Sales
German Retail Sales
German Unemployment
EU CPI Inflation
EU Unemployment Rate
Canadian GDP
US Core Personal Expenditures
With so much going on, in what is a shorter than normal week, make sure to stay in close contact with your account manager to be kept informed of exactly what the impact on your upcoming currency purchase is, and what your options are to manage your risk.