Turbulence warning in currency markets

19 August, 2014

Matthew Boyle

Yesterday saw a fairly quiet start to what is set to be a busy week as the day saw no data releases of any major note. As a result we saw the pound lose a small amount of ground, most noticeably against the Euro and Dollar following last week’s BoE inflation report providing the sentiment that the pound may well have been overpriced. This coupled with a release showing positive growth in Euro trade balance (up to 16.8B from a predicted 15.0B) saw the single currency gain around 30 pips during the day’s trading whilst the greenback stole around 0.5 of a cent.

Today sees the start of what is a fairly busy week so be prepared for the markets to move more than we saw yesterday, particularly if we follow the current sentiment of the pound being overpriced. This morning we have GBP CPI data and also some lesser PPI and retail reports, all of which will be an interesting tell – has the pound run out of steam and we will continue to see a contraction of rates? With little in the way of Euro data today it is really down to the pound to begin to address this concern.

This afternoon focus shifts across the Atlantic to the U.S as it is there turn to offer a CPI report, alongside some housing and building data. Like the Euro in recent weeks the Dollar has turned the table on the previously flying pound and in the last month has taken back nearly 5 cents of previously stolen ground. So the Question here is can the greenback continue its advance given the current pounds weakness, and indeed how far can it go? Against EUR the USD has also in recent weeks been on a flyer, with the tables strangely inversed in recent weeks with GBP on top, are we now seeing normal service resumed and USD reclaim its No.1 spot and safe-haven status?

With the market ever evolving and all three of the majors currently experience a large degree of turbulence it seems we have entered a period of slight uncertainty. Any of you with upcoming USD or EUR requirements for sending money abroad would be well advised o stay in close contact with your CI broker, who can keep a close eye on things and alert you should things move so you don’t get left disappointed and out of pocket. With the volatility we are currently seeing, speak to your CI broker today.Currency Index can help you stay well informed and well ahead of the market.