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March 2016

Sterling awaits big data week

Published: Monday 21 March 2016

  • Sterling awaits big data week
  • Euro stronger as ECB rules out further extraordinary measures
  • Commodity currencies weaken on oil slide
So England won the Grand Slam and the 6 Nations in a scrappy but effective game in Paris. And the best part was watching Billy Vunipola lip-syncing to a Back Street Boys track in the dressing room after the game. If you haven't seen the video, it's worth Googling.
On to more serious stuff and the resignation of Iain Duncan Smith seems to have absorbed the press over the weekend but it isn't market moving news. Further views on the potential for Britain inside and outside the EU have been voiced but they are just points of view. However, Sterling is in for a really cluttered week of data. It starts with the CBI industrial trends survey today; which should show a slightly less bad situation that the Feb reported. That's the hors d'oeuvres but tomorrow brings consumer inflation, manufacturing output government borrowing and a number of speakers on the state of the economy and inevitably, on the subject of Brexit as well. Tuesday will be a shopper for GBP traders, so get ready.
This is also a big week for data from the Eurozone.  We have already heard this morning that the ECB is ruling out further 'extraordinary' measures to support the Eurozone economy. Those sorts of measures tend to weaken the Euro, so ruling them out ought to effectively strengthen the shared currency.
The commodity linked currencies of the Aussie, Kiwi and Canadian Dollars as well as the South African Rand are all a tad weaker today after another slide in energy prices. There isn't much more to say on that; it is just a straightforward cause-and-effect thing but the Reserve Bank of Australia Governor is due to speak this evening (UK time) and his words will be followed very carefully and there is a smattering of Aussie and New Zealand data through the week, so plenty to keep us watchful.
We will get the final Q4 economic growth data from America this week but it doesn't appear anyone is expecting any kind of last minute revision. If that's true, then the 1.0% quarter-on-quarter growth figure will still leave US growth in a mildly positivize phase but is it enough? That's not rhetorical; I just don't know whether that is going to be enough to justify the Fed's rate hike. I think it is more likely to support their recent dovish tone. The USD is still reasonably strong but it has lost some of its momentum in recent weeks.
And it's a short week, so all this excitement needs to be packed into 4 days. Then it is the Easter break where we celebrate by putting our pancreases under extreme strain. Seems odd when you think of it like that but that is the case. Anyway, I'm off to buy a few kilos of chocolate anyway.

The interview

A newly qualified accountant goes for an interview with a small local company. The MD meets him and, after some small talk, the MD says, "What I need is someone to take over all my worries."
"Excuse me?" says the young guy.
"Well I worry about a lot of things but mostly they come down to money. So I need someone to do that worrying on my behalf."
"That sounds like a lot of responsibility." Says the young man. "What does the job pay?"
"It's £75,000 per annum with some perks as well." Sys the MD
"That's a great offer but how can a small manufacturer afford that?" asks the guy.
"I like it," Says the MD. "You're a fast learner. That's worry Number One."
Market BST Data/Event Previous Expected
EUR 09:00 E19: ECB current account sa, bn 25.5 25.5
GBP 11:00 UK: CBI industrial trends, total orders -17 -14
USD 14:00 US: Existing home sales, mn saar 5.47 5.40

FX Research by David Johnson

Daily Currency Analysis with Chris Verdet

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