Sterling Riding The Sentiment Wave
26 May, 2015
Last week the pound ended with a strong rally across the board as we saw sterling rise in value by over a percent against most major currencies on Thursday albeit with a dip on Friday as we saw profit taking by traders cashing in on the sharp rise the day before. Friday was light on data, with markets ignoring speeches from Mario Draghi and Mark Carney whilst focusing on the ecostats from the US which saw the release of inflation data, showing an improvement on the month before and beating expectations from analysts. This resulted in dollar strength, gaining nearly a cent against the pound and two full cents against the euro.
As we have seen recently the currency seesaw has come back into play, which our regular readers will know is the fact we often see the US dollar and the euro on opposite sides, when one strengthens the other by default weakens and vice versa. In this example, the strengthening dollar led the way for the euro to weaken, and the pound took the benefit, gaining back initial losses we saw first thing after a raft of positive German ecostats saw the single currency gain pace.
The other releases of note were over in Canada which saw inflation figures and retail sales announced. The inflation figures came in a little under expectations but markets reacted positively to the retail sales which outshone forecasts and like the UK earlier in the week, the Loonie took the benefit, gaining a cent.
This week started with bank holidays around the world, with the UK taking the day off for spring bank holiday and most of Europe celebrated Whit Monday, whilst across the pond the US celebrated Memorial Day. So a short week to close the month and a fairly light week of data for the UK meaning we are likely to be sentiment led again as investors take their lead from the little data we do have, the highlights can be found below:
Tuesday – all about the US with durable goods orders, Markit services, Markit PMI, consumer confidence, manufacturing index and house price index.
Wednesday – German Gfk consumer confidence survey and the Bank of Canada interest rate decision
Thursday – UK GDP, UK business investment, EU consumer confidence, UK Gfk consumer confidence survey (overnight)
Friday – Swiss, US and Canadian GDP
A quiet week for the UK as the month comes to a close so we should be in for an interesting ride as the markets digest the stats from elsewhere and rates move accordingly. Anyone with a transfer to make before month end may find it prudent to get in early but whatever your plan, make sure to speak with one of the CI team for some friendly guidance.
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