By Simon Eastman
Last week the foreign exchange markets experienced notable movements, primarily influenced by central bank activities and economic data releases.
The USD strengthened, reaching a 2.5-week high, buoyed by expectations of a 25-basis point interest rate cut by the Federal Reserve, bringing rates to 4.25 percent from 4.5 percent. This anticipated cut is seen as a strategic move to support economic growth while maintaining a cautious stance on future rate reductions.
On Thursday, the euro depreciated against GBP and the USD following the European Central Bank’s (ECB) decision to cut interest rates by 25 basis points, lowering the deposit rate to 3.15 percent from 3.4 percent. This move was aimed at stimulating the Eurozone economy amid sluggish growth and persistent low inflation.
The pound experienced volatility the previous week, initially declining following the Bank of England’s (BoE) decision to keep interest rates steady at 4.75%. However, it rebounded last week slightly as markets adjusted to the BoE’s cautious approach, balancing inflation concerns with economic stability.
A raft of poor data on Friday however, caused the pound to lose ground as GDP came out at negative 0.1 percent rather than the forecast 0.1 percent and manufacturing and industrial production figures all came in negatively having expected to show slight growth in the respective sectors. Sterling lost a cent against the single currency and traded down versus the US dollar as trading ended on Friday.
The Key Points This Week
Monday: EU, German, UK, and US purchasing managers index, the leading gauge of business activity in manufacturing and services sectors. ECB president Christine Lagarde also makes a speech.
Tuesday: UK unemployment. German IFO and ZEW business surveys. EU trade balance. Canadian inflation. US retail sales.
Wednesday: UK inflation. EU inflation. US Federal Reserve interest rate policy meeting and statement (after UK trading hours). NZD GDP
Thursday: EU leaders summit. Bank of Japan interest rate decision. Bank of England interest rate decision, minutes, and monetary policy report. US GDP, unemployment, and new home sales.
Friday: EU leaders summit. UK retail sales. Canadian retail sales. US inflation. EU consumer confidence.
A massive week for all currencies as markets wind down ahead of the festive break. Looking at securing any upcoming currency requirement on a forward contract, is one solution to reduce currency risk, so why not speak to one of the team today for some friendly guidance. Get yourself sorted currency-wise and crack on with the mulled wine and mince pies!