Very busy week on the markets UK and US interest rates in focus

Last week was an interesting, if fairly uneventful, week on the markets. The big piece of news came in the second half of the week when UK GDP was released showing the first quarterly reading since the Brexit vote. With most commentators expecting a very weak figure there was pleasant surprise when the quarterly figure came in showing 0.5% growth, and an annual growth figure of 2.3%. The ONS reported that “the pattern of growth was largely unaffected by the referendum result”, and this led to a clamour of pro-Brexit sentiment and calling out of the various doom-mongers who had predicted the UK would be in recession by now following the June vote.

This positive sentiment was not however reflected in the Pound’s position. While remaining within the same range we have seen over the last couple of weeks, Sterling did lose around a cent against both the Euro and the Dollar over the course of the following couple of days. The reason for this is most likely to be a simple reflection of the continuing uncertainty in the market – we haven’t actually left the EU yet, the Bank of England are still expected to cut interest rates over the next couple of months and critically now there is a question mark hanging over the head of Mark Carney, the Bank of England governor. Governor Carney was one of the key voices to express the view that the UK economy would be in a lot of trouble post the referendum vote and so his credibility is currently being called into question. Coupled with the renewal decision on his BoE contract due imminently and a feeling there could be some “personal reasons” for a move back to Canada, his continued stewardship of the Bank of England is very much in doubt. Does the UK really need to be bedding in a new BoE governor at this moment, with Article 50 due to be triggered early next year, and interest rate moves on the agenda?

The week ahead is incredibly busy with a whole raft of critical data out from across the major economic zones. Most notably we have central bank policy decisions from the UK and the US, and the US Non-Farm Payrolls. Could the Bank of England go as soon as November with their proposed interest rate cut? Might Janet Yellen and her team raise rates in the US? All will be revealed as the week goes on.

Monday
UK Mortgage Approvals
European GDP

Tuesday
Australian Interest Rate Decision
UK Manufacturing PMI
US Manufacturing PMI

Wednesday
UK House Price Index
European Manufacturing PMI
UK Construction PMI
US Interest Rate Decision and Policy Statement

Thursday
UK Services PMI
European Unemployment Rate
UK Interest Rate Decision and Policy Statement
US Jobless Claims
US Services PMI

Friday
Australian Policy Statement
European Services PMI
European PPI
US Non-Farm Payrolls

Make sure you stay in close contact with your Currency Index account manager if you have an upcoming currency purchase as all of this various data will almost certainly lead to volatility and with some very critical data coming at the back end of the week, we could see significant movements.