By Simon Eastman
Last week was again a fairly quiet one for the pound which continued to remain out of favour, with Brexit backlash and set backs to our vaccination program. We did see a slight uptick as the week ended, but coming from the rangebound low, it wasn’t anything to shout about.
This week we have a great deal happening which could affect the exchange rates from the UK, EU and the US. A full brief is below but some of the highlights follow:
On Tuesday eyes will be on the UK and unemployment rate which jumped to 5.2 percent from 5 percent in January. Will March post another increase still? In addition to this, the focus will be more on the claimant count which saw a startling increase last month of 86,000 new claims for job seekers allowance, despite the government shoring up business with the furlough scheme. Any increase to either number is likely to be detrimental to the pound so ones to watch for sure.
Wednesday we have inflation figures for the UK where we are expecting an increase of 0.3 percent. If this figure is missed, we are likely to see sterling suffer as a result, plus with Bank of England member Andrew Bailey speaking soon after, one would expect to hear so guidance on whether we could see policy tightening at some point this year to stimulate inflation up towards the Banks 2 percent target. Lower interest rates mean less return, so generally point to a weaker currency as less appetite for investment in the currency.
The ECB are meeting on the Thursday to make any announcements regarding their current monetary policy. While it’s not thought any changes will be announced with interest rates, there has been some recent speculation they could alter their asset purchase (QE) program. This gave the euro a boost as curtailing the effective “printing of money” and flooding markets with euros, dilutes the value. Stopping this process will have the opposite effect, less currency in the markets, means the value should start to increase as demand rises. This coupled with the increasing activity in the EU vaccination program all bode well for the single currency which has made gains of late against sterling and the US dollar.
For the UK retail sales and public sector net borrowing are also key releases later in the week. With only essential shops open, retail sales are unlikely to be a show stopper, but next month could be a different story now we can go back to proper retail shopping. PSNB is likely to be another big number as the government have to carry on funding the recovery, so we shall see how the figures come out and their effect on the pound.
For the full list of key data releases see below. Feel free to call one of our friendly team today to discuss your personal currency requirements and how the following may affect you, plus find out the tools available to best suit your needs.
Data Releases
Tuesday
AUD – RBA minutes
UK – unemployment, claimant count and average earnings
EU – ECB bank lending survey
NZ – inflation
Wednesday
AUD – retail sales
UK – inflation
UK – BoE speeches by Ramsden & Bailey
Canada – inflation, interest rate decision, policy statement and press conference
Thursday
ECB – interest rate decision, policy statement and press conference
Friday
UK – retail sales
German, EU, UK and US – manufacturing and services PMI