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This week started off with little economic data due from the UK, Eurozone and US economies. Any short-term movements in currency markets were due to less significant data, or to ongoing themes. These include the UK’s impending Brexit, the US interest rate timeline, and the European debt crisis.
This demonstrates the potential for currencies to fluctuate even in data-sparse times. To mitigate losses on your international payments, contact us today.
Sterling remains low despite house price increase
Sterling remains on the back foot following last week’s revelation from the Bank of England (BoE) that we could see a further cut in interest rates as early as in November. The economic data from the UK has been mixed in the last couple of weeks. Economist are still fairly ‘dovish’ on the prospects for growth as uncertainty continues to muddy the water.
The rebound in housing prices continued this morning. Rightmove stated that the average asking price rose 0.7%, or £2,277, in September. This follows the doom and gloom seen in July following the outcome of the infamous Brexit referendum. This has taken the average cost for a home across England and Wales to £306,499. However, house prices are still at a deficit compared to the drop that we saw before the referendum.
The UK’s calendar of data releases is fairly light this week. The biggest price risk to the UK will be on Wednesday evening as the US Federal Open Market Committee meets to discuss the prospects of interest rates, with the some investors believing they could increase interest rates. As the world’s largest economy, any action that the US central banks takes here could have an effect on currency rates. Meanwhile the biggest domestic risk will be on Thursday when BoE Governor Mark Carney speaks. He is due to deliver an Arthur Burns Memorial Lecture in Berlin.
Today’s Eurozone focus on Germany
This week is a busy one for data releases from the Eurozone, but Monday saw little data of significance released from the Eurozone. The data releases that we did see showed mixed signals as to the stability of the region’s economy, with a worsening of Current Account figures, but an increase in the flows of investment to the Eurozone. The euro gained slightly against the US dollar; against sterling, it weakened during trading hours, but finished stronger against the pound.
Today sees an increase in Eurozone data releases, with low tier data coming in from Portugal, Spain, Finland and Germany. The only data releases of note are month-on-month and year-on-year Producer Price Index (PPI) figures released from Germany this morning. Any deviation from expectations could have an effect on the euro, as this data is a good barometer of the price of primary goods in Europe’s largest economy.
Quiet build-up to Federal Reserve announcements
With minimal data out from the US, movement on Monday was seen to be driven by sterling. Today we can expect more of the same, with only Building Permits data due to be released from the US, which is expected to show a small increase on the previous month, for the second time in a row.
With a quiet start of the week expected, investors will be looking forward to Wednesday, when the US Federal Reserve’s Interest Rate decision is due. Also in the spotlight on Wednesday are the Federal Open Market Committee (FOMC)’s economic projections, statement and press conference.. It is widely expected that the central bank will keep its key interest rate on hold within its current range, but the statement that follows that could give clues as to when an interest rate hike could happen.
For the latest rates and news on a wide range of currency pairings, please get in touch with your Smart Currency Business trader on 020 7898 0500 or your Private Client trader on 020 7898 0541.
