By Simon Eastman
Sterling ended last week stable keeping the gains made after the Bank of England hawkishly cut interest rates by 25 basis points on Thursday. The tight vote split led investors to slim down chances we will see another rate cut in the near term so the previously priced in 50-point cut was priced back out and the pound ended the week in its best position for early two weeks against both the euro and US dollar.
This week we have a raft of strong data releases across the globe, although today we have the calm before that storm of economics as we see nothing of note reported.
Tuesday kicks off with the Reserve Bank of Australia interest rate decision, where a cut of 25 basis points is expected. GBPAUD has dropped some 6 cents in the past month, so a cut could give some better buying opportunities for those looking to move down under.
In addition, the UK releases its unemployment rate, which should stay stable. Any change to this could leave sterling vulnerable. We round off with US inflation figures with a raft of consumer prices, with an increase expected. This may give some opportune trading levels for buying cable, as higher inflation would give credence to those thinking the Fed may cut interest rates again sooner than currently expected.
Wednesday has all eyes focused on Germany as they release consumer price inflation figures, with no change on last months 1.8 percent yearly figure expected.
Thursday kicks off with Australian unemployment data overnight, followed early morning by UK GDP, industrial and manufacturing production readings. As the trading day starts, the EU also release their GDP and industrial production reading, plus employment change figures. We end the day Stateside, with jobless claims and the producer price index, an inflationary reading which gives an indication on the changes in cost of producing the goods for consumers. A high reading is generally seen as positive for the currency involved and a low reading negative – with markets expecting a better reading than last month, we could see the dollar benefit off the back of this.
The week rounds off on Friday with just US retail sales and the Michigan consumer sentiment index, giving an indication to markets on consumer attitude to spending, with a healthy reading (above 50) implying economic growth. A better than forecast reading is generally viewed as a positive for the currency, so again, one to watch for anyone looking to buy USD in the near term.
A busy week with plenty to upset the currency apple cart, so make sure you stay in touch with the team here for some friendly guidance, helping you make your money go further.