Market Recap and Week Ahead

19 February, 2018

Simon Eastman

Last week we saw the pound vary in performance, trading in a very tight range against the euro, whilst making fairly significant gains against the US dollar.


Over the past week, the trading range for sterling/euro was a cent overall. The raft of data releases for both sides had only a small effect, with UK inflation coming out lower than expected, still holding at the 3 percent marker. German GDP missed its expectations, whilst the EU as a whole came out on point, so no surprises the rates ebbed and flowed between the pound and the euros favour. To end the week, UK retail sales fell short of forecasts leaving the pound open to selling yet again, but finding a reprise as the so-called “punishment clause” hinted at the last Brexit talks by the EU was reportedly removed from the EU’s plans for the Brexit process.


While the pound seemed to struggle against the euro, sterling/dollar was a different matter. Higher inflation and PPI figures, along with worse than expected unemployment data led investor sentiment to once again slip away from the greenback. Despite the fact that inflation increasing is a key alert for central banks to consider interest rate hikes, so should be dollar positive. We already expect the Fed to raise interest rates 3 times at least this year, so for the dollar to be weakening shows there are other factors involved. One could be the drop in trade with China, which is a significant market for the US, has seen a 9 percent decrease in the last 12 months.But we should also be mindful, that the dollar weakness is also being exacerbated by a stronger euro and sentiment can change from week to week.

The fact is, for anyone buying dollars, the rates moved well in your favour last week, gaining some 4.5 cents over the weeks trade. One must be cautious to not miss the boat should you have a dollar buy requirement, just in case we see a fall back this week, as experience the last time GBP/USD were at these leaves a few weeks ago. You’ve gained the inch, don’t risk it by waiting and potentially losing a mile.

The Week Ahead

Its a quiet start to the week with Chinese New Year, Canadian Family Day and US Presidents Day all closing local markets, while nothing of key is released from the UK or EU.

Overnight Monday sees the Reserve Bank of Australia release minutes from their most recent interest rate setting meet, ahead of German and EU ZEW consumer confidence figures on Tuesday.

Manufacturing PMI for the EU and Germany on Wednesday followed by UK unemployment and average earnings stats plus public sector net borrowing in the morning. Come the afternoon we will have Mark Carney delivering the Bank of England’s inflation report, which can be a key mover of sterling exchange rates. Wednesday concludes with US manufacturing PMI, homes sales data and the minutes from the latest FOMC meeting at 7 pm.

Thursday brings UK GDP in the morning, ahead of Canadian retail sales at lunchtime, whilst Friday brings the week to a close with German GDP, EU inflation, Canadian inflation and a string of US Fed member speeches.

A slow start but a busy week ecostat wise, so if you have an upcoming currency transfer to make, keep in touch with the team here at CI for all the latest developments and to discuss the tools available to you for minimising risk.