By Simon Eastman
Last week we saw the pound fare well against most currencies, following a mixed week of data releases.
The week started poorly as jobs data missed the forecasts, plus the key release everyone was waiting for, inflation, also missed expectations. Inflation was up from the month before, but not by as much as expected, leaving traders to speculate further as to whether we might see another interest rate cut from the Bank of England, who meet again in a few weeks time.
A cut in interest rates, as we have seen from the one at the start of August, is detrimental to a currency as it’s less favourable for investors, as their return is going down. As such, we saw the pound lose nearly 3 cents against the single currency on August 1st, and last week, the pound dropped a cent when the inflation reading left the door ajar for another rate cut in the future. When this might be, by how much and how often are all questions traders are speculating over and will likely bring volatility to the pound as we head towards the final quarter of the year.
The end of the week saw the pound end on a high as retail sales and GDP came out on point and industrial and manufacturing production levels beat expectations, a good sign for the overall UK economy. GBP/EUR ended up Friday pushing out of the 2 year range and making good ground, but with the possibility of interest rates being cut further, the pound’s strength was tapered. GBP/USD also made good gains as the week ended, with the pound up 2 cents over the week, helped by some poor US stats and a broadly weaker dollar.
The week ahead is a much quieter one from a data point of view, which means market sentiment and speculation will most likely be the main driver of rates this week. The main releases of note are listed below, but for further in-depth analysis and some friendly guidance, speak to one of the team today about your upcoming currency requirements.
Monday – German central bank monthly report.
Tuesday – EU inflation, Canadian inflation.
Wednesday – FOMC minutes.
Thursday – EU, German, UK and US Composite, manufacturing and services PMI, US Jackson Hole Symposium, UK GfK consumer confidence survey.
Friday – Canadian retails sales, US Jackson Hole Symposium.