Euro & Dollar Experience Good Two Months

8 May, 2013

Tom Arnold

Current rates have been fairly stable since last week’s much anticipated European interest rate cut and as such Euro and Dollar buyers are still experiencing not far off 2 month highs. There have been some fluctuations as various small pieces of data come out, but generally the rates have been very range bound.

There is not much in the way of critical data due out today. We have already had out the Halifax house price survey in the UK, which in contrast to last week’s Nationwide survey was more positive about the UK’s house prices, showing a 1.1% MoM increase and 2% YoY, and we have some German industrial figures out later this morning. But other than some low key US data and a speech from a member of the FOMC, most investors will have their eyes cast forward to tomorrow, which is much more data-rich.

The focus for tomorrow is very much on the UK, with both industrial production and manufacturing production data out first thing and then critically the monthly policy announcement from the Bank of England at midday.

Industrial and manufacturing data has been less than positive for some time now, with many critics of the government highlighting these areas, coupled with construction as the reason we are experiencing such stagnant GDP figures. Negative figures are again expected, so this could be the first sign of trouble for the Pound tomorrow.

The Bank of England will then announce their monthly policy decisions at lunchtime. While there is widely expected to be no movement on interest rates, there are some thoughts on the possibility, with the ECB last week using this as a means of attempting to stimulate some growth in their combined economies. The Bank of England has mainly used Quantitative Easing as it’s stimulus mechanism, so this is more likely to be the area of concern for investors.

Either interest rate cuts or further QE will likely weaken the Pound, so if you have an upcoming requirement then the fairly stable rates, just off 2 month highs that we have today could well be the best bet, rather than risking tomorrow’s data.