How will the Pound fare this week

9 June, 2014

Simon Eastman

Last week was very much lead by the Central Bankers, with all eyes on the European Central Bank and whether they would cut interest rates in the single economic area. This has been rumoured for the past couple of months, with each time the ECB keeping things as they were, but always hinting that rate cuts and QE were still in the armoury of tools to combat slow growth in the Eurozone. 

This time they didn’t disappoint, and we saw the interest rate and more significantly, the overnight deposit rate being cut, the latter to less than 0 percent, meaning banks had to pay them to keep their money. The idea behind this is to encourage banks to not keep money on deposit, but to lend it out to businesses and individuals to help stimulate growth in the economy.

ecb rates

As a result, the euro initially weakened dramatically across the board but with this cut being widely expected the losses were limited and short lived, with levels returning to the levels of exchange seen earlier in the week fairly quickly. For those exchanging pounds to euros the window of opportunity was brief.

Non-farm payroll from the US on Friday came in just under expectations, which caused the dollar to weaken but as US trading continued the dollar managed to strengthen. This was mainly due to investor sentiment, shying away from the more risky pound and putting their funds into the lower yielding dollar and euro, both of which made gains against the pound as the week came to a close.

So what does this week have in store for us?

Monday is pretty quiet across the globe with much of Europe on holiday for Whit Monday. On Tuesday, Chinese CPI data is fairly key and although not having much affect on sterling, can have an effect on some of the Pan-Asian currencies including the Aussie and Kiwi dollars. UK industrial and manufacturing production figures should have some influence coinciding with various European GDP figures. We also have the key NIESR GDP estimate for the UK in late afternoons trade which could cause some volatility.

Wednesday things start to pick up with UK unemployment data first thing and the RBNZ policy statement late evening, Australian unemployment figures overnight followed by ECB monthly inflation report and US retail sales. The week rounds up German inflation figures and EU unemployment and trade balance.

Plenty out, but not much for the UK so we could see Friday’s sentiment against the pound continue. If you have a currency transfer to make using sterling, it might be worth looking to make it earlier in the week just in case. Speak to one of the experienced currency brokers at Currency Index today to discuss you requirement.