Subdued start to week

5 March, 2013

Graham Harborne

A fairly subdued start to the week yesterday which saw the pound trade against both the euro and dollar in a fairly tight range, though in fairness it did strengthen gradually throughout the day. There is a raft of PMI data out today along with eurozone retail sales. These could weigh on the pound or euro depending how the figures come out but in all honesty I wouldn’t expect too much movement in the markets with much more important data due out later in the week.

We have BoE and ECB rate decisions this week and for the first time in a while we could see changes to both central bank policies. With mixed data from the UK, and a much larger vote for the extension of QE at the last meeting, we could well see an increase to the current programme which would likely lead to sterling weakness. However within the hour of the BoE decision there is a possibility that the ECB may cut rates. Mario Draghi has been much more dovish in his recent speeches leading many experts to predict a rate cut may well be around the corner. We also still have the uncertainty surrounding the Italian government which is also weighing on the single currency.

Finally we have Non Farm Payrolls from the States at the end of the week. The USD has been the winner in the currency battle in recent weeks and another strong reading could see it continue its climb. If you don’t want to take a risk you can contact your Currency Index account manager and secure your exchange rate before these key events, but if you want to gamble then be aware you could get burnt. A 2% movement the wrong way, which is possible with such key announcements would see a £200,000 currency requirement costing you £4000 more!