By Kian Songra
The end of last week saw the pound regain its strength, re-testing the peak of the 2-cent range, and reaching levels that we haven’t seen in the last 12 months. This presents the chance for those seeking their dream property abroad, to take advantage of these trading levels and remove the exposure to any downward risk. The euro has continued to weaken against both the pound and dollar as both the Bank of England (BoE) and Federal Reserve (Fed) seem stronger in their stance to not cut interest rates compared to the European Central Bank (ECB). Interest rates and the speculation surrounding any cuts in rates have ultimately been dictating investors’ decisions and the eurozone has been seen to suggest that cuts could be on the cards in the near future due to cooling inflationary pressures.
Therefore, importantly today ECB president Lagarde speaks addressing the outlook for the Eurozone and this meeting will be closely scrutinised by economists looking for hints about its future policy decisions. BoE Huw Pill also speaks, and his role is predominately to provide analysis to the BoE to then make monetary policy decisions, so any comments made that could suggest changes to any policies may be actioned in price by investors.
Ofgem, the UK’s energy regulator, announced last Friday that the typical energy bill will fall to £1,690 from April to the lowest for two years under the new price cap. This will help curb any further increases in inflation levels and head back on track towards the target 2% that Rishi Sunak envisages by the latter stages of 2024. This could alter economists’ outlooks on when the government may decide to cut rates down from the current held level of 5.25%.
Conscious that the week ahead is heavy in terms of data releases for the Eurozone and a quiet week in terms of data for the UK, it is important to be aware that any strength or outcomes that are positively unexpected for the euro will test the strength the pound has seen in the past few weeks. It could therefore be prudent to secure currency if there are requirements that need to be taken care of, if you’d like to remove the risk of any downside movements. The EU has its inflation data being released on Friday, which the market will be closely watching as the outcome could affect future policy decisions regarding the highly anticipated rate cuts in interest rates. Germany is the most influential country in the eurozone, meaning any data releases that are released, historically show to affect the euro, therefore a close eye should be kept on the various data releases this week.
Sterling has seen a comeback against the dollar picking up momentum as sustained uncertainty about the Fed decisions on when to cut rate looms, despite increased bets for a delayed rate cut amid hawkish FOMC minutes and commentaries. However, the dollar has a chance to peg back against the pound this week as little UK data is being released in comparison to the US and so any dollar strength could subdue these renewed gains. Notably the annualised GDP figure for the US will be released on Thursday, with the previous annualised figure showing an expansion in growth of 3.3%, beating forecasts of 2%. The consensus for the data release is that it will be unchanged, but any reading that comes out higher is seen to be bullish for the dollar and a lower reading is dovish. Market participants will be keeping a close eye on these important data relapses as it is a key indicator for the US economy’s growth and health.
The US has manufacturing PMI data, which is a report of data compiled from purchasing and supply executives nationwide, coming out on Friday. Economists’ sentiment suggests that the figure will be 49.5%, 0.4% higher than the previous reading of 49.1%. It is assumed that a figure above 50% indicates the manufacturing sector expanding and below it is declining. Any release out of line in terms of the market expectations could result in some volatility from the market’s reaction.
Those with requirements for currency should stay in close contact with A Place in the Sun Currency so that you can get friendly guidance and assistance for your specific requirements.