Quiet week draws to a close with a busy day

29 January, 2016

Tom Arnold

In relative terms this week has been quite a quiet one on the currency markets with the Pound operating within a very narrow range of only a cent or two against both the Euro and the US Dollar. This is in stark contrast to the week before where the central banks of the UK and Europe caused wild swings in exchange rates with their differing announcements on anticipated interest rate policy. Mark Carney said that the UK is very unlikely to raise interest rates until well into 2017, and Mario Draghi said that Europe is likely to have to cut interest rates in the coming couple of months. Cue a rollercoaster of initial Pound weakness, then offset by a significant bout of Euro weakness. This week has not seen anything like this type of movement, with the various data releases mainly coming in as expected, with no great surprises.

This was true no more so than with UK GDP yesterday. UK growth was shown to have dipped from 2.1% to 1.9%, but this was exactly as expected and as such, despite the negative that slowing growth should produce for the local currency, the Pound has shrugged off any ill effects, and is in fact managing to claw back some of its recent losses.

Today is quite a busy day on the markets with a couple of key data releases due out in the form of European CPI inflation and US GDP. European CPI is likely to give us some further clues as to the likelihood of those European interest rate cuts or possibly more importantly the extent of the anticipated cuts and US growth is going to be key – is the US economy doing as well as US Dollar strength seems to be suggesting, or could this be a reality check?

Overnight the Bank of Japan have cut their interest rates and this has caused significant movements in the Yen – this is unlikely to have much effect on the other majors – Sterling, Dollar or Euro, but could certainly have knock on effects on the Antipodean currencies, so watch this space for updates if you are looking to transfer funds down under in the coming days.

As ever stay in close contact with your Currency Index account manager to be kept informed of exactly what is happening and what the effects are likely to be on your upcoming currency purchase.