Range bound week draws to a close as the Dollar drops off

11 September, 2015

Tom Arnold

As the week draws to a close we find ourselves looking forward to a potentially very quiet day on the currency markets. There is an almost complete absence of data of any note due out, with a Bank of England consumer inflation survey the only release in the UK, US PPI the only contribution from the other side of the pond, and German CPI, which came out earlier and failed to interest the markets at all, the only European contribution.

As a result we are likely to finish the week following the trends of the recent days/weeks, which is generally range-bound stability. For a couple of weeks now we have seen the major pairings operating within a fairly tight range of around 2-3 cents as a result of the holding pattern the markets find themselves in, as we await an interest rate change most likely from the US or UK, any more conclusive evidence of an outcome from the recent stock market problems in China or any surprises from the range of ecostats that come out day to day.

The movement we have seen in the last few days has been a perfect example of overriding trends outweighing the general day to day, with contrary movements seen on various occasions. Negative UK GDP at the same time as Pound strength, negative UK industrial/manufacturing figures at the same time as Pound strength and a weakening Euro when German trade balance figures were sharply improved – all good examples of the market ignoring data because of background machinations and trends.

In the last 24 hours there has been a bit of a surge to one end of the ranges with the Dollar weakening and the Euro strengthening. The reason for this seems to be a slight drop off in the feeling that the US rate hike we have been waiting for might come next week. The Fed are expected to raise rates in the short term, but it seems that the problems in China, resulting in a selloff of Chinese Dollar stocks – $94 billion in August – could have diluted the market enough as to restrict the Fed’s options this month. Ultimately we will have to wait and see, but this does give Dollar buyers and Euro sellers a bit of hope, and having a look at your requirement today gives a potentially good buying opportunity.

With the markets causing confusion with their contrary movements and unusual behaviour, it is more important than ever to keep in close contact with your CI account manager to keep abreast of what is happening and the likely impacts on your upcoming currency purchase.