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May

What you may have missed last week and what to watch out for this week…

Published: Monday 14 May 2018

  • Place your bets on predictions for the Pound
  • Euro has difficult week – could there be more trouble ahead?
  • US Dollar strides onwards
  • Asia Pacific market movements imminent?
Sterling softens on economic activity

The Pound started off last week with little movement, down to the UK Bank Holiday, not even moving as the Brexit debate kicked off again in the Cabinet. Sterling was then swept away by the to-ings and fro-ings of its major currency companions, particularly the US Dollar and Euro, who sailed down their own streams – upward and downward respectively – in the wake of political and economic events.

Sterling stood stronger against the Euro early in the week as the Eurozone focused on its own economic issues. However, several big events on “Super Thursday” chipped away at Sterling’s strength: the Bank of England’s decision not to raise interest rates and growth forecast downgrade, following lacklustre economic performance; and disappointing Gross Domestic Product (GDP) figures.

The UK economy was hit hard by “The Beast from the East”, but Bank of England Governor Mark Carney, usually prone to gloomier rhetoric, seemed fairly upbeat, saying that with the bad weather behind us, the current struggles are only a “temporary softening”. The Pound fell around a cent against the US Dollar as news broke, but recovered a little at the end of the week, moving up half a cent on Friday.

Place your bets on predictions for the Pound

This week has started off quietly again, but is likely to be a volatile one for the currency markets – Sterling is unlikely to escape unscathed. UK employment and wage data results are expected on Tuesday: while markets predict a small drop in average wages, the unemployment rate could also dip further, and this could prove a boost to the Pound, as unemployment levels for the UK are already low.

Euro has difficult week – could there be more trouble ahead?

While economic data for the Eurozone is on the up, it’s not to hoped for levels. Political pressures have also come back to the fore, with another Italian election on the horizon and the continued Brexit negotiations. In addition to home grown economic concerns, the Euro has suffered from US Dollar strength recently.

This week, the European Central Bank (ECB) has a series of speeches planned, along with key industrial, consumer and growth data, so there is scope for some movement for the single currency.

US Dollar strides onwards

Meanwhile, the US Dollar remains strong, having begun the week at the highest levels against its major currency pairings for four months. The US currency is strong despite US inflation growing at a slower pace than anticipated. Inflation is still increasing at a healthy rate, though, so there are no real concerns there. Israel-Iraq tensions and US sanctions on Iran are serving to boost USD strength; and, while higher oil prices would usually cause problems for the US Dollar, the USD is still riding high.

The week ahead could also prove a good one for the US Dollar, if the optimistic US outlook continues and the retail, industrial and sentiment data for the US show good form. The only counter balance to that could be increasing oil prices, but positive energy production figures for the US.

New Zealand Dollar dips on inflation

The Reserve Bank of New Zealand (RBNZ) kept their interest rates the same this week, too. Good jobs and economic growth results were recorded for New Zealand, although consumer price inflation has come in under target, with inflation on food and import pricing having an effect. The RBNZ has once again confirmed that it is unlikely to raise interest rates anytime soon, and this dampened the NZ Dollar a little.

Australian Dollar could be lifted by recent housing market results

Real estate data for Australia shows a fall in market volumes, which, in a heated property market, could serve to boost the Australian Dollar.

Asia Pacific market movements imminent?

Both the New Zealand and Australian Dollars have the potential to move this week, owing to oil prices, important Chinese industrial production data and some key data from the Antipodes. We also await the next Consumer Confidence Index for Australia – which made its mark on currency markets last month – and the Budget statement for New Zealand.

Japan continues monetary policy plans

Japan’s latest central bank announcement confirmed that Japan is still reliant on their significant monetary stimulus policy to boost levels of inflation up to meet targets. This quantitative easing programme is likely to continue for some time yet with inflation at current levels. The Japanese Yen and US Dollar seem to be trading very tightly in their capacity as relative “safe haven” currencies and in expectation of the key US data and economic announcements due this week.

Canadian Dollar on the up – will it continue?

The Canadian Dollar could also be affected by Chinese Industrial Production data this week, not to mention the latest Canadian retail and inflation figures also expected. The CAD is currently enjoying a strong position, thanks to Canada’s export relationship with the USA and recent US Dollar strength. The Canadian Dollar rose against the Pound last week and a positive outlook for Canadian employment and optimistic outlook for the North American Free Trade Agreement (NAFTA) negotiations are also supporting the Canadian currency.

#MondayMotivation

Did anyone see the Eddie the Eagle film on TV last night? If ever there was inspiration to believe in yourself and to never give up, that story has it in spades. Quite telling in terms of political attitudes and international stereotypes, too – not much has changed since the Eighties, if the film is anything to go by.
 
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