Busy week ahead ECB in focus

Last week saw a change in fortunes for the Pound as it managed to step out of the pre-EU-referendum doldrums and claw back some of its losses against both the Euro and the US Dollar. This was despite some fairly weak UK data, and was mainly down to weakness for both the Euro and the Dollar.

In Europe the focus has shifted to this week’s ECB meeting, with the general consensus being that the ECB are likely to cut interest rates by 10bps and also increase their quantitative easing package. A drop in interest rates lowers the yields investors can expect to get and hence weakens a currency, as investors go elsewhere for their profits and QE simply dilutes a currency and hence lowers its value. So this news is a double whammy for the Euro and so we have seen the Pound gain over 3 cents against the single currency.

In the US, the picture is a little less clear. On the face of it their economy is doing well, but a slightly deeper look at the figures shows that the Dollar is probably a bit overpriced following its months of steady gains. Non-farm payrolls on Friday was a good example – the figure released was very positive, but revisions to earlier numbers caused a drop in the running average and wage growth numbers were lower than expected, so initially the Dollar strengthened, but when a full analysis was done, the Dollar dropped significantly, giving Sterling a 3 cents success here too.

The week ahead is a busy one:

Monday
Eurogroup meeting

Tuesday
German Industrial Production
European GDP

Wednesday
UK Industrial Production
UK Manufacturing Production
UK NIESR GDP
NZ Interest Rate Decision

Thursday
UK RICS House Price Survey
German Trade Balance
German Current Account
ECB Interest Rate Decision + Monthly Policy Statement

Friday
German CPI Inflation
UK Consumer Inflation Expectations
UK Trade Balance

Much of the focus will be on the ECB announcement on Thursday, but there is plenty here to cause some significant movement on the markets, so make sure you stay in close contact with your account manager to be kept informed of exactly what is happening. Last week’s jump in rates is good news for those with Sterling in hand, but it surely won’t be long until the focus comes back to the referendum and starts to weigh on the Pound again – could this be the buying opportunity you have been waiting for? Speak to your Currency Index account manager today, to see what your options are.