GDP Overshadowed by the Greeks
16 February, 2015
The week ended on a downer for the pound across most of the major pairings, all bar the euro, US dollar and Danish Krona.
The euro started Friday on a good note as German GDP posted a much better than expected reading of 0.7 percent compared to an estimated 0.3 percent. This gave the single currency a nice lift as trading opened gaining half a cent against sterling.
This should have been boosted further at 10 am when the actual GDP for the EU as a whole came out, as a higher than forecast figure was posted, but yet again Greece overshadowed the reading as they posted a domestic GDP reading of 1.7 percent which was way down on the expected 2.2 percent. The euro proceeded to lose all the gains it had made earlier in the day and a further half cent once the US markets opened.
The US dollar followed suit as cable went sterling’s way as the dollar dipped to its weakest levels since the start of the year. Sentiment clearly went in the pounds favour following the euro-zone data, compounded by US consumer sentiment figures which came out at 3 pm showing sentiment had dropped from 98.1 last month to 93.6, where the expectation was for the levels to stay the same.
For anyone sending money to Denmark, the Krona got that little bit cheaper again on Friday as the Danish central bank cut interest rates again to a record -0.75 percent. The Danes are concerned, just like the Swiss were, but they have no intention (yet) of cutting their ties. As such, they are selling off the Krona to keep their peg and cutting interest rates to make the country less attractive to investors, basically actively turning away investment in the country. They say they have plenty of Krona in reserves, so can continue to keep their pegging but is the reality something different and could we see the program come to a halt like the Swiss. The uncertainty is bound to keep the euro under pressure but with so many other factors and the Greek issues in the forefront we can expect volatility for sure.
This week we have a few data releases to contend with but the most key is the series of EU meetings happening, kicking off with the Euro-group meeting today. Its Presidents Day in the US so no trading there and no UK data so it will be donw to sentiment and any statements from the EU meeting to drive rates.
Here are the key picks from the rest of the week:
Tuesday – EU EcoFin meeting, Australia RBA minutes, UK inflation, German & EU ZEW economic sentiment survey, Swiss SNB Chairman speech.
Wednesday – ECB non-monetary policy meeting, UK BoE minutes, UK average earnings & unemployment, US inflation, US FOMC minutes
Thursday – EU consumer confidence, US unemployment
Friday – UK retail sales, Canadian retail sales
Plenty to go on for the week so we could be in for a bumpy week. Ensure you stay ahead of the game by keeping in touch with the team here at Currency Index.
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