A Week Of Central Bankers

20 January, 2016

Simon Eastman

Tuesday saw the pound suffer further losses against all the major pairings, having been on a downward trend since before Christmas, but with a seemingly more worrying gusto over the past 10 days.

Yesterday the pound crashed through a major resistance floor against the single currency, spending much of late afternoons trading at fresh lows. Against the green back the rates are still steadily heading south towards another major resistance floor as the US dollar takes further strength from risk averse trading sentiment after China posted a lower than expected growth figure.

As far as sterling/dollar goes it was only the pounds weakness which kept the greenback rally on throughout the day. Against the euro the dollar did less well, losing half a cent over the course of afternoon trade. The Chinese data missed the mark but wasn’t in fact all that bad, being only 0.1 percent off forecast and still posting 6.8 percent growth, while retail sales and industrial production came out pretty much as expected.

German inflation figures came out as expected, as did the ZEW German economic sentiment survey and EU inflation data. The only negative for the Euro was the overall EU ZEW survey coming out lower than forecast but it didn’t seem to matter to investors. The UK inflation figures as with its counterparties, all came out as expected but markets were waiting for Mark Carney and his speech to pay too much attention to the ecostats.

Carney used his speech to push back interest rate expectations further. Last year he hinted we could have sharp action at the turn of the year but the slide n oil prices, Chinese unrest and a slowdown in UK wage growth has pushed the Governor into a much more “wait and see” stance. We now don’t expect a rate rise to be considered before 2017 while the dovish nature of his speech will leave many speculating over whether we might even see some monetary tightening from the BoE such as a rate cut of QE. It’s very much a “Watch This Space” situation.

Today brings more inflation and more central bankers, this time in the form of the Bank of Canada at 3pm followed by the press conference at 4.15pm. before that this morning UK jobs data including unemployment, whilst after lunch the US inflation figures come out.

Yet again a day of key data releases ahead of the ECB meeting and press conference on Thursday so if you have any currency transfer to make in the coming days it’s been more and more clear that adopting a motto of “sooner rather than later” is the best way forward, so give one of the Currency Index team a call today for some friendly guidance and the best exchange rates.