Quiet ahead of the storm – Markets nervous ahead of big data

21 January, 2015

Matthew Boyle

Yesterday was quite a strange day for trading as we saw GBP>EUR strength amidst positive Euro data. German ZEW economic data predicted to show a growth from 34.9 to 40.00 which came in at 48.4 whilst the ZEW survey for the Eurozone again predicted to grow to 37.6 from 31.8 which also surpassed expectations showing growth to 45.2. Despite these bits of positive data the pound throughout the day’s trading stole around a cent.

The markets seem still in shock from last weeks announcement, but many would argue that they are now preparing for Thursdays ECB announcement of potentially more Q.E. We may indeed be seeing much of this priced in as many would argue the Swiss pulling the pegging is a clear indication that the ECB are likely to announce further stimulus measures, whether that be a change to interest rates or further Q.E. Be wary though those of you with Euro requirements as there is no guarentee that this will be the case and with rates currently so high, waiting any longer does pose a considerable risk. With little ceiling room with where the rates are currently poised and a vast cavern left below with the recent increases, should Mario and the ECB not firmly take action we could see recent gains quickly eroded. Furtehrmore after Thursday on the 25th we have the Greek vote – yet another huge event which could equally see rates climb further or plummet, dependant on the result.

So certainly any of you with Euro requirements may well like to take out the risk given current rates and the fact that as we sit further climbs in rates will take much more effort for the market than any drop. Elsewhere throughout the day’s trading the USD lost slightly – around half a cent against the pound and against the Euro it remained relatively stable albeit current USD>EUR are fantastic. However be clear that at present the USD is very strong and currently being “fuelled” by cheap oil prices is in part adding to current Euro woes.

Today the pound takes centre stage with BoE minutes and unemployment data.

Take note though with so much riding on Thursdays ECB meeting and the following Greek vote however in the short-term the focus is very much on the single currency. So following last week’s Swiss announcement and with much of the potential data seemingly priced in, add to that current GBP>EUR rates being helped by the USD it would seem at present somewhat of a perfect storm.

With so much riding on results (which no-one can predict) you may like to take advantage of current rates now to protect yourself, should indeed the current climate change and rates slip back down.