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Pound put under economic pressure again

Published: Monday 30 April 2018

  • Economic data dominates
  • US Dollar benefits from business
  • Eurozone economic woes on the down low for now…
Pound put under economic pressure again

The Pound started the week lower but not in too bad shape, considering its counterparts, the Euro and US Dollar, were also under pressure from economic events, and was hovering around 1.13 against the Euro and 1.37 versus the US Dollar. The exchange rate levels were also pretty reasonable when you look at some of the lows that the Pound has reached just weeks ago, but having seen some strength in recent weeks, the fall seems more noticeable, and this has an effect on overall market and consumer sentiment. However, doom and gloom has descended once again – and not just the weather in the UK, which is cold, wet and miserable. Much like the political situation in the UK at the moment… Recent political pressures have taken their toll and pushed the Pound back down, following the latest UK Parliament shuffles.

UK traders all had their eyes focused on the UK Gross Domestic Product (GDP) results at the end of a mixed week for the markets, to assess how well the UK economy is doing. Sadly, it was not good news. Growth was only 0.1% for the last quarter, a five-year low and well below the forecasts of 1.4% and rumours that there could be an even bigger improvement on the previous quarter. This has dampened Sterling’s spirits once more.

Bank of England Governor, Mark Carney, is now in no position to raise interest rates in the UK, with a slowing of growth both in the UK and across Europe.

Japanese data dominates

At the end of last week, significant number of Japanese economic announcements were released during Asian trading. The results were a mixed bag, but the Japanese Yen strengthened against its major currency partners following strong industrial performance.

Chinese economic performance on the up

The manufacturing and services results from China released overnight (UK time) were above expectations and helped boost the currencies of China’s close trading partners, such as Australia and New Zealand. There’s plenty of data to come out of Australia and New Zealand, too, which could easily move currency markets.

US Dollar benefits from business

In the US, impressive business results and employment data boosted the US Dollar, as Facebook and AMD reported strong results. A fall in unemployment also contributed to a perkier USD. This comes in contrast to predictions of a fall in growth for the US economy. In contrast, US GDP exceeded expectations, showing that the US economy is growing at a much faster rate than markets expected.

Key data releases for the US and Canada this week could mean an interesting ride for the US Dollar...

Eurozone economic woes on the down low for now…

The European Central Bank (ECB) confirmed interest rates are staying the same, with their monetary stimulus policy also remaining until September, and beyond, if required.

All eyes for the markets were on ECB President, Mario Draghi, to look for clues on the real state of the Eurozone economy, whether the economic stimulus programme will continue post-September 2018, and if there is likely to be any interest rate hike further into 2018.

The Euro has felt the pressure from all the speculation, having strengthened in the run up to the announcements. There will be more volatility for the Euro this week, thanks to continued political pressures, as talk of an Italian election spreads and German retail results showed a significant fall.

Read more about the European Central Bank decisions and what they mean.

A break from data Down Under

A belated Happy ANZAC Day to our friends and clients in Australia and New Zealand! Markets were quiet in the Antipodes over the public holiday, so there is little to report from Down Under last week, although the Australian Dollar did have a slight movement in response to slowing inflation data at the start of the week. This week is an entirely different story, however, as we are expecting a number of important economic data releases.
For more information, infographics and the latest currency insights, visit www.halofinancial.com/news