Currency News The Week Ahead

7 September, 2015

Simon Eastman

Last week was a mixed bag for the currency markets as sterling was still reeling from the Chinese interest rate cut.

The Chinese Central Banks surprise actions which had subsequently benefitted the U.S. dollar, as investors concerned over global economic stability caused an influx of safe haven trades, meant we were seeing some of the lowest levels of exchange for buying USD in some months.

The euro was doing well up until Thursday when the European Central Bank met and hinted that further quantatitive easing was still an option the ECB would be considering should current inflationary pressures continue to hinder growth of the unions economic recovery.

So all in all, a week of mixed sentiment from investors but with the U.S. dollar seemingly winning helped by the jobs and unemployment data. The headline non farm payrolls figure actually came in lower than forecast at 173k which was even lower than the expected reduction of 220k from last months 245k. Initially we saw a large spike up as the dollar weakened but as traders quickly digested the rest of the jobs data the dollar rallied back. Average earnings was up and unemployment was down, both better than forecast and from this the dollar continued to rally throughout the rest of the day’s trade.

Elsewhere in Canada, their jobs data showed the net employment change, which was expected to drop, actually increased by 12,000 although the unemployment rate as a whole got worse and by more than forecast. Finally the PMI figure beat expectations coming out at 58, over 52. Anyone looking to move money to Canada on Friday saw rates fluctuate by a cent down, back up, down and back up again in the space of two hours!

Overall sterling didn’t end well, ending lower against most of its major pairings all bar the Canadian and Australian dollars, the latter taking a hit from the U.S. data as being a high yielding, riskier currency, when investors decided to plough into the greenback at lunch, the riskier currencies were sold.

So onto the week ahead and we have Labour Day today, so markets across the pond are closed as the U.S. and Canada take a day off. It’s a quiet start to the week as just German industrial production stats hold any relevance.

Tuesday we have the Swiss unemployment rate along with German import/export and trade balance stats and most importantly the EU GDP reading.

Wednesday is UK focussed with trade balance, industrial and manufacturing production in the morning followed by the NIESR GDP estimate mid afternoon. Canadian interest rate decision and policy statement comes out at the same time (2pm) with RBNZ interest rate decision and statement later in the evening (9pm). Australian unemployment data comes out overnight at 1.30am.

Thursday is key as its the UK interest rate meeting with the Bank of England giving their rate decision plus releasing the minutes and holding a press conference shortly afterwards.

Friday concludes the week with the release of German inflation, UK consumer inflation expectations and U.S. inflation.

A very data heavy and undoubtedly busy week on the currency markets so be sure to stay in close contact with the team here at CI to stay abreast of things to come.