Busy week ahead in the currency market

11 May, 2015

Tom Arnold

Last week the markets focus was almost completely taken by the UK general election, and what was going to happen, with most pollsters predicting a close result, a hung parliament, and critically a long and painful negotiation before some hodge podge of a coalition was formed. This uncertainty and negative outlook for the governance of the UK led to significant drops for the Pound most noticeably against the Euro, where the rate fell by as much as 5 cents over the course of just a few days.

In the end the result wasn’t close at all, and with the “market friendly” Conservatives winning a full majority, the Pound jumped dramatically on release of the first exit poll, and continued to gain as the full results came in. By the end of the week the Pound had gained back most of the loses against the Euro and had touched a 3 month high against the Dollar.

In other big news from last week the Greeks managed to make their required payment to the IMF, albeit at the last minute and US Non-Farm Payrolls came in significantly above expectations. Both were good news for their respective currencies and caused some positive movement.

The week ahead is a very busy one with lots of key releases due:

UK Monthly Policy Statement – including interest rate decision

UK Industrial Production
UK Manufacturing Production

French + German + Italian GDP
French + German + Italian CPI Inflation
European GDP
European Industrial Production
UK Bank of England Quarterly Inflation Report
European ECB Monetary Policy meeting Accounts
UK RICS House Price Balance

European Ascension Day Bank Holiday for many countries

European Trade Balance

With much of the early week focus on the UK, we are back to normal service, with analysts watching out for indications from Bank of England Governor Carney as to when we might expect to see interest rate rises. With the BoE’s policy statement today and the quarterly inflation report on Wednesday, we should get a pretty clear idea of what the Bank’s current thinking is.

In Europe there is a massive day of data on Wednesday before much of the bloc closes for a bank holiday on Thursday. There are also ongoing negotiations between the Eurogroup and Greece, as well as another Greek interest payment due. The US is quiet for most of the week, with little data of note out at all.

It is not unusual when we see massive reactions on the currency markets to see some corrections and settling of the rates. Whether a busy week, as we have this week, will allow for that is a hard one to say, but if you have an upcoming currency requirement and you have Sterling to exchange, then rates are back near the highs, and now could well be the best opportunity for locking your rate in. Stay in close contact with your CI account manager to be kept up to date with what is happening and what options are available to you.