Currency Market Report – A story of central bankers

22 August, 2014

Tom Arnold

This week has been somewhat topsy turvy on the currency markets, especially for those of you starting with Sterling. Initially the Pound weakened as lower than anticipated inflation data caused interest rate rise expectations to go further onto the backburner, but then the Bank of England minutes came out showing that in fact two of the MPC members had voted for a rate hike this month, and as a result the Pound bounced back recovering the losses made earlier in the week.

Today sees an almost complete absence of critical data anywhere unless you have an interest in Canada, where they have CPI Inflation and Retail Sales figures due out today. The outlook for these figures looks quite mixed, so for you Loonies out there, make sure you keep a close eye out.

The reason for the absence of data today could be that the world’s major central bankers are all in Jackson Hole for a meeting to discuss various worldwide economic issues. During this meeting a number of key speeches are expected, most notably today from FED Chair Janet Yellen and also ECB President Mario Draghi. Yellen is due to speak about the US labour market and Draghi is going to try and explain what the ECB are doing to help the Eurozone economy, which could be a hard task considering the ongoing failure of their policies to generate a UK/US like turnaround in their fortunes.

Both speeches will be watched very carefully and you can expect the currency markets to react dependant on what is said, and the tone it is said in. The Dollar has been taking back significant swathes of strength in recent times across the board, and this is only likely to continue if Yellen comes out with further positive comments. Draghi’s position is much harder, so there could be some trouble ahead for the Euro.

The Bank of England are also giving a speech, but this is on Saturday while the markets are closed, and not much in the way of fireworks are expected.

As ever stay in close contact with your CI account manager to be kept informed on what is happened and how that is affecting your upcoming currency purchase.