Busy day on the currency markets central bankers in the spotlight
24 February, 2015
A relatively slow start to the week yesterday, quickly accelerates today with a lot of key data, announcements and meetings for the markets to digest.
We have already seen some positive GDP figures come out from Germany, and while widely expected, they do show that Europe’s largest economy is safely out of the recessionary zone, and this should be quite positive for the Euro. Unfortunately for anyone searching for Euro strength, the Euro is unable to take advantage of any good news with the spectre of the Greece situation hanging over it. Today should see the final confirmation of the 4 month extension to the Greek’s loan, but until the announcement is made by the Eurogroup, the markets will continue to fear the worst.
We also have Europe’s overall CPI inflation number due this morning and a speech from ECB president Mario Draghi later on to watch for. With low oil prices affecting Europe as much as anywhere else, inflation is due to drop lower, but this is unlikely to have too much impact. Most watchers instead will be waiting to hear what Draghi has to say. Impacts of the new QE program, comment on the Greek situation, fears over a slowing global economy – all could cause significant movement for the already ailing Euro.
In the UK we have a relatively quiet day, with no data releases due, but there is the small matter of the inflation report hearings. This is an opportunity for the Treasury select committee to grill Mark Carney and his deputies on the inflation situation, interest rates and the overall UK economy. Inflation as we know is very low and expected to probably go negative for a period soon, but Carney was very upbeat and hawkish (interest rate rise positive) when he spoke on the subject recently, so once again UK interest rates are to the forefront and we can expect the markets to analyse every word to see if there is even a hint of when rates might start to rise.
In the US there are a few releases today, notably services PMI and a consumer confidence survey, but as with both Europe and the UK, most observers will be keeping their eyes and ears firmly focused on Janet Yellen’s testimony to Congress on the economic situation in the US. As with the UK, this is an opportunity for the US government to grill Yellen on the current economic climate and upcoming policy from the FED. Unlike Carney, Yellen is much more dovish and coupled with uncertainty in the global markets, the US Dollar has lost some pace recently despite fairly positive and potentially supportive figures from the US economy. Will she today give any clues to potential interest rate rises in the US? The race to raise rates was supposedly all but done with the US expected to win and the Dollar to make hay, but it just goes to show what different central bank tones can do to the market…
Current rates for buying Euros are near the best for seven years and for Dollars the best so far this year. Could a Greek solution cause Euro strength, will Mark Carney be more circumspect and weaken the Pound, will Janet Yellen deliver the positive speech the US ecostats seem to suggest she should and give the Dollar a boost?
Make sure you stay in close contact with your CI account manager to be kept informed of exactly what is happening and how it is likely to impact your upcoming currency purchase and if you don’t want to gamble on what the central bankers might say, then consider securing your rate now, while rates are high, using a forward contract.
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