September brings fresh breath to ailing pound

Last week we saw the end of August and the start of September bringing with it a fresh round of ecostats and some seemingly positive attitude towards sterling.

The PMI figures released at the start of the month all came in better than expected giving the pound a welcome boost. Couple that with some under forecast EU stats and the renewed talk of interest rate rises for the US led the single currency to move further down in investor sentiment.

Over the weekend the news that Angela Merkels political party suffered its first defeat against the Populist party, which is anti immigration, showed how the German people are becoming less patient with her open border policy and delivered a bitter blow to the Chancellor who has yet to decide if she will run for the top job when the national elections come round again in 12 months time.

In the Eurozone there is speculation as to what, if any, action Mario Draghi and the ECB may take on Thursday when they hold their Q3 policy meeting, with some feeling that with inflation still hovering near zero and the backlash from the Brexit vote, they will more than likely have to increase their QE stimulus programme. The uncertainty, coupled with the EU data, gave way for sterling to take over 3 cents at its peak, settling on just over 2 cents by close of trade.

We have to wait two more weeks until the Fed give their decision on whether we will see a further rate hike across the pond, with the feeling in investors’ minds that we will, although the recent non farm payroll figures which came in under expectations on Friday may dilute the reasons for a hike even further, leaving way for further dollar weakness, to add to the 3 cents the pound took of it last week. It’s Labour Day holiday today in North America so we could see some opportune buying rates with anyone looking to buy US or Loonie dollars.

This coming week we have plenty more to go on so keep in touch with the team here at Currency Index to keep up to date and discuss the ramifications for your personal requirements. The highlights are listed below:

Monday – EU and UK Markit services PMI
Tuesday – RBA interest rate decision, EU GDP and US Markit services PMI
Wednesday – AUD GDP, UK inflation report, Canadian interest rates, UK NEISR GDP estimate, US Fed Beige book (a key insight to overall economic performance)
Thursday – ECB interest rate meeting and policy statement.
Friday – Swiss unemployment, Eurogroup meeting, UK consumer inflation expectation survey, Canadian unemployment and housing starts.