Pound Sterling (GBP)
The Pound began Monday trading in a strong position against the majority of its currency competitors following the uptrend caused by a hawkish Bank of England Governor. Mark Carney intimated that a bank rate increase could occur in the near future.
Monday’s British data hasn’t printed particularly positively which is likely to initiate a controlled downtrend. Bank of England Consumer Credit declined from £1.10 billion to £0.898 billion, Mortgage Lending dropped from £2.3 billion to £2.28 billion and Mortgage Approvals fell from 66, 600 to 64,210.
With a plethora of domestic data on Tuesday it is likely that Sterling will be subject to volatility. Consumer Confidence, Current Account, final second quarter Gross Domestic Product Growth and Business Investment all have the potential to provoke Sterling movement. Should these publications meet with the market consensuses the Pound is likely to appreciate.
Wednesday will be a quiet day in terms of British data releases. The Manufacturing PMI, however, is an important enough publication to initiate changes. Should it meet with forecasts for a rise from 52.5 to 52.6 the Pound will likely finish the day in a promising position.
Similarly, On Thursday UK Construction PMI will be the only British data publication which holds enough weighting to be a market mover.
Friday’s Services PMI will be a crucial data publication for Sterling, especially when you consider that services makes up the vast majority of the British economy. Those invested in the Pound will be hoping that the data defies the forecast drop from 60.5 to 58.6.
Euro (EUR)
The single currency has started Monday’s session in a weak position after a succession of disappointing data from Germany last week. The European Central Bank will welcome its depreciation however, as more expensive import costs will galvanise local manufacturing and make exporting more competitive.
On Monday the European economic data publications have been generally poor. Business Confidence declined from 0.16 to 0.07, Consumer Confidence fell from -10 to -11.4, Industrial Sentiment dropped from -5.3 to -5.5 and Economic Sentiment declined from 100.6 to 99.9.
Tuesday’s Unemployment Rate data holds perhaps the most weighting in terms of influencing movement. It is forecast to equal the previous figure of 11.5%. Inflation Rate and Core Inflation Rate will also be of interest, especially as a gauge to see if recent ECB stimulus initiatives have had an effect.
Wednesday’s Manufacturing PMI is expected to decline from the previous score, as is the third estimate of the yearly Gross Domestic Product Growth Rate. Should this data meet with the market consensus of a declination it is likely to cause the single currency to depreciate.
On Thursday European Central Bank policymakers will meet to decide on interest rates. Given the terrible performance of the Euro of late it is very unlikely that the ECB will make any steps to normalise monetary policy. In fact, the likelihood is that they will choose to initiate further stimulus in order to counteract Eurozone stagnation. Should this be the case, the Euro exchange rate is very likely to decline massively. Given the importance of this economic event it is doubtful that any of the other data will register in comparison, and the Euro is likely to fall in the run up to the decision and the following press conference.
Friday’s European data could push the Euro one of two ways. If the interest rate decision on Thursday leads to yet more stimuli it is unlikely that the Composite and Services PMI’s will provoke any change. However, should the interest rate decision throw out some positives than the Euro may well benefit if Friday’s data prints positively.
US Dollar (USD)
The US Dollar ended last week in a position of strength after an upward revision to the US Gross Domestic Product score.
Some of Monday’s US data has the potential to provoke volatility. The yearly Core PCE Price Index, Personal Income, Personal Spending and Pending Home Sales will be the ones to watch for those invested in the ‘Greenback’ (USD).
Tuesday’s Consumer Confidence data holds the most weighting economically and as a potential market mover. The Chicago PMI and yearly Home Price publications may also have an influence on Dollar movement.
Wednesday’s Employment Change and Manufacturing PMI data will be of the most interest to those invested in the US Dollar. Manufacturing is expected to equal the previous figure of 59, and employment change is forecast to decline from 204,000 to 199,300.
Thursday’s US labour market data will be of importance as one of the conditions preventing a bank rate increase. A good result for Challenger Job Cuts, Continuing Jobless Claims and Initial Jobless Claims will put pressure on the Federal Reserve to normalise monetary policy.
There will be several US reports published on Friday, each of which with the potential to initiate volatility. Balance of Trade and the Non-Manufacturing PMI hold significant influence over market movement. Perhaps even more important, for the reasons addressed above, is Friday’s labour market data. Non Farm Payrolls is expected to increase from 142, 000 to 192, 000 and Unemployment Rate is forecast to equal the previous figure of 6.1%.
UPDATE
The US Dollar trimmed its run of gains overnight as technical analysis indicated that the safe-haven asset had been overbought.
As stated by strategist Sean Callow; ‘It just looks as though the market might have gorged itself on US Dollars a bit too much in recent weeks. It wouldn’t be surprising if we had more of this. The US Dollar just seems to have priced in more good news than the US economy is currently creating.
Further US Dollar exchange rate movement could be triggered by today’s US Consumer Confidence index. The measure is believed to have risen from 92.4 to 92.5.
