Last week was a very interesting week on the currency markets. The pound performed very well further to very strong manufacturing data and rose over 3% against the Euro. The European single currency has had a bad week as concerns over sovereign debt in peripheral economies resurfaced. On Friday the Pound reached 1.20 to the euro. Over the past two years it has only been above this level for nine weeks, when the Greek debt crisis spooked the markets last summer
The week has been mixed for the US Dollar. Wednesday’s employment data was particularly strong which gave the Dollar a lot of impetus. However Friday’s employment report showed that nonfarm payrolls rose by less than was expected. This curtailed some of the Dollar’s gains at the end of the week, though analysts are expecting gains to continue this week
Of the key US data releases this week, the retail sales report released on Friday tops the agenda. Headline sales are expected to be strong and supported by strong performance in the auto sector. Also key is the Consumer Price Index (CPI) and Retail Price Index (RPI). Both released on the same day, these will be affected by strong commodity prices. Inflation isn’t as ingrained in the US as it is in the UK, so a large rise toward 2% is not expected.
Also of note is the industrial production report for December and a number of FOMC (Federal Open Market Committee) members will be speaking.
On this side of the Atlantic traders are keenly awaiting results of the European Central Bank (ECB) interest rate decision on Thursday. The interest rate will remain unchanged at 1% but the attention will be given to the post meeting press conference. This is the key European economic announcement of the month and traders get to hear exactly what policy makers are thinking. It will also be interesting to find out the depth of concern about Portugal’s debt, and whether there are risks of contagion.
There are also various industrial production and CBI reports from Euro zone members. Germany’s GDP announcement on Tuesday will be strong.
In the UK markets will look toward November’s industrial production report and Decembers BRC (British Retail Consortium) retail survey. Nationwide consumer confidence and Halifax house prices are both expected to be weak. The National Institute of Economic and Social research will release an estimate of GDP growth for the last quarter of 2010. On Thursday the Bank of England will announce an unchanged interest rate of 0.5%, we will have to wait for two weeks to see the minutes for that meeting.
