Sterling fight back, rampant Dollar

The last week has seen somewhat of a change around on the currency markets, with Sterling making a gain of a couple of cents against the Euro and the Dollar resuming its pummelling of all the other majors.

The Pound took some strength from the Bank of England minutes that were released midweek. These showed that despite lower than expected inflation, two of the MPC’s policy makers are still voting for an immediate interest rate rise. UK retail sales also came in above expectations on Thursday. Both of these caught the market a little bit by surprise, and as a result the Pound reversed some of its recent loses.

The Euro having taken strength earlier in the week from some above expectation consumer confidence figures, finished weakly as a result of poor manufacturing and services data.

The Dollar was the definite winner with a higher than expected CPI inflation figure, giving the FED plenty of room to raise interest rates sooner rather than later. The Dollar became the yield-seeking investors first choice and hence gained significantly across the board.

Currency News – The Week Ahead

This week sees plenty of important data and news releases for the market:

Monday

• German IFO sentiment index
• US Markit PMI

Tuesday

• German GDP
• UK Inflation Report Hearings
• UK Mortgage Approvals
• US GDP
• US Consumer Confidence

Wednesday

• UK GDP
• US Durable Goods Orders
• US Jobless Claims

Thursday

• German Unemployment
• European Consumer Confidence
• German CPI Inflation

Friday

• UK Consumer Confidence
• German Retail Sales
• UK House Price Survey
• European CPI Inflation

The big releases at home to watch out for are the Inflation Report Hearings tomorrow – where the Bank of England Governor is quizzed by MPs on the economy generally, but specifically inflation, interest rates and what is expected to happen – and UK GDP on Wednesday – growth in the UK economy has slowed recently, so this will give us a key picture of how the economy is doing. Both of these are likely to paint a longer term picture for the Pound, so it could be a critical week for Sterling exchange rates and therefore the cost of your international payments.

US and German GDP are likely to be the big releases of note elsewhere – the German economy narrowly avoided a negative figure last time out, so this will be very much under the spotlight to see if this has been maintained. In the US the story is different with a much more positive outlook, but the Dollar’s strength is still potentially vulnerable to below expectation data, so the markets will still be watching closely.

During such a busy week, make sure to stay in close contact with your CI account manager to be kept informed of exactly what is happening, how it is likely to affect your upcoming currency purchase and what your options are to try and achieve the best exchange rate.