Sterling’s fate tied to other currencies today, in the run up to significant UK data on Tuesday
A currency market update from Charles Purdy, director of Smart Currency Exchange.
After powering to a strong end last week due to poor US data, sterling’s fate today will again largely be in the hands of Eurozone and US data.
It is set for a slow start to the week, with the first key focus for the week on Tuesday morning, where we see a raft of inflation data released from the UK. Consumer Price Index (CPI) dropped below 0% into negative territory in October and the forecast figure is expected to remain at -0.1%. As inflation data is a key driver in raising interest rates and following the recent cautious tones from the Bank of England (BOE), some shock inflation data would be required to cause more BOE members to re-address their standpoints.
Thursday will also be another telling day, with retail sales data released. Following a steady month for September, the forecast figure of -0.2% for October suggests a sharp drop off. Any surprises here and or with inflation data could spell movement for sterling.
Is the euro poised for another disappointing week?
The euro had a poor day to end another disappointing week against sterling and the US dollar, as discouraging Eurozone third quarter growth data had a negative effect on the single currency. Data earlier on Friday morning showed that Eurozone growth figures had ticked up slightly to 0.3% in the third quarter, but crucially missed expectations for a 0.4% gain. French and German growth figures were as forecast, so these had very little impact on the euro market.
Because of Fridays shocking events in Paris on Friday evening, the euro may get off to a rocky start this week. Eurozone inflation data out at 10am; this is forecast to fall slightly from 0.2% to 0.1%. Consumer confidence data from Europe towards the end of the week could also be a key release. It is forecast to improve slightly from -7.7 to -7.5 – this would be a steady improvement for the European economy. However, worse-than-expected data could lower investor confidence in the economy, and deal a blow to the euro.
Busy week Stateside could mean movement for the US dollar
It was a poor day for the US dollar on Friday in terms of data releases, with both retail sales and producer inflation figures falling short of expectations. However, this did not change the views of some US Federal Reserve members, with many members calling for an interest rate hike in the short term.
We can look forward to a host of data this week. Tuesday will see consumer inflation and industrial production data, with the first positive figure expected in 3 months for each. However, the spotlight will be on the Federal Reserve meeting minutes on Wednesday, especially when it comes to members’ views on a possible rate increase, with many members being very open about the possibility of a December rate hike. Thursday will see the release of the weekly labour data (another stable figure is expected here), followed by the Federal Reserve Bank of Philadelphia manufacturing index, where an increase on the previous month’s figures is forecast.
Eventful week for the Canadian economy
An eventful week for the Canadian economy starts today at 1.30pm when manufacturing sales results are released. After beating expectations for the last two months on the bounce, the central bank will be hoping for much of the same. However, the results of these releases on the Canadian currency may be short-lived, as inflation and core retail sales figures will be released on Friday.
New Zealand got off to an early start this week with retail sales figures released overnight, which showed there had been a much better than expected increase of 1.6%, the key driver being auto sales. Tomorrow we will see from the New Zealand economy its inflation expectations and products index.
