By Nick Harrison
In recent weeks we have seen a lot of market volatility due to US President Donald Trump’s policy of imposing global trade tariffs. The US Dollar lost significant ground against the Euro & Pound but there seems to be, albeit temporarily, a bit of respite in the fallout from Trump’s aggressive policies. This played out from the middle of last week as we saw the central banks in the US and UK announce their interest rate decisions. Both held at 4.5% as expected and both cited inflationary pressures from Trump’s tariff policies. The US FOMC and Bank of England’s Monetary Policy Committee were both looking to cut their interest rates this year, but the Trump administration has halted this as higher inflation is expected to result from the tariffs. Central banks use higher interest rates as a tool to curb inflation so, for the time being, the central banks are waiting to see what ongoing effects the trade tariffs will have before deciding about future monetary policy.
This Week
A very busy week lies ahead for the UK and today we see figures released for Flash Manufacturing and Services PMI (Purchasing Managers Index). PMI is a leading indicator of economic health. Businesses react quickly to market conditions and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy. A figure above 50.0 indicates industry expansion – below indicates contraction. The manufacturing figure is forecasted to come in at 47.3 and the services figure has a forecast of 51.2 so this could be a interesting start to the week as investors cast their eyes over these figures.
The UK year on year CPI (Consumer Price Index) figure is then released on Wednesday. This is considered the UK’s most important inflation data because it’s used as the central bank’s inflation target. Consumer prices account for a majority of overall inflation and this is important to a currency because rising prices lead the central bank to raise interest rates to curb higher inflation. The previous figure came in at 3% with the latest figure expected to come in at 2.9% so focus will no doubt shift to this figure which is release early on Wednesday morning at 7am.
Wednesday then sees the Chancellor Rachel Reeves announce her spring statement and spending cuts are expected to be announced. She has already stated that she intends to cut 10,000 jobs in the civil service and other cuts are expected to follow. Last week the government announced welfare cuts in an attempt to save up to £5 billion over the next 5 years.
She has confirmed that no tax rises will be announced this week, so this will not be an actual budget but there will no doubt be a lot of interest in what she has to say.
Finally, Friday morning sees the release of the UK’s Retail Sales figure. This is a primary gauge of consumer spending which accounts for the majority of overall economic activity, so again we will see investor interest in this figure. The previous figure came in at 1.7%, but this week’s number is expected to show a contraction of minus 0.3%.
So, a full-on week for the Pound. Please do reach out to your Currency Consultant for a full update on these releases. These releases could significantly impact the cost of your currency, so keeping up to date with what is happening in the FX market could potentially save you thousands of Pounds.
Elsewhere, there are other data releases from the US and Eurozone. Along with today’s UK Services & Manufacturing PMI figures, we also see the same data released for the EU & US.
Already this morning, we have seen both French and German PMI figures released and both have come in under forecast. We haven’t seen any market reaction from these figures yet, but the likelihood is that investors will be waiting for the UK and US figures later today before any decisions are made.
On Thursday, US GDP and Unemployment Claims are released, with Friday’s Core PCE Price Index in the US finishing off what could well see another volatile in the FX Market.
See below this weeks market data releases which we will keep you up to date with as another busy week commences….
This week’s market data
Monday
UK Manufacturing & Services PMI 9.30am
US Manufacturing & Services PMI 1.45pm
UK Bank of England Governor Bailey Speaks 6pm
Wednesday
UK CPI 7am
UK Spring Statement TBC
Thursday
US GDP 12.30pm
US Unemployment Claims 12.30pm
Friday
UK Retail Sales 7am
US Core PCE 12.30pm