UK to the fore

17 March, 2015

Tom Arnold

In recent times the market’s focus has been completely dominated by the Euro; with what’s happening with Greece and the new QE program grabbing the headlines, and as a result we have seen limited impact from anything that has been released elsewhere The Pound has made hay against the Euro and otherwise not done much of note and the Dollar has pulverised everything as top level investors jump ship from the Euro to avoid dilution of their investments.

Last week we saw a change to this trend with the markets finally paying attention to something else, when Mark Carney, the governor of the Bank of England, spoke about inflation and how a strong Pound was bad news and could therefore lead to delays in interest rate rises. Within the Pound’s current strength there is priced in, interest rises in the UK either later this year or early next, and with yield seeking investors critical to any currency’s performance, any delay in these rises will definitely cause Sterling weakness. This has already started to be realised, with the Pound down significantly across the board, most notably against the Euro and the US Dollar, which are both 2 cents better off thanks to governor Carney.

Today sees various data releases of note, with European CPI inflation, and employment data, followed closely by ZEW economic surveys for Europe as a whole and Germany individually. The Euro has been making slight gains of its own in the last day or so, so these should be watched carefully to see if any Euro positive momentum starts to build.

A couple of low key US releases later, complete the day’s data releases before tomorrow’s main event arrives.

It’s all about the UK

Tomorrow is a big one for the Pound, with the Bank of England minutes out first thing, then UK average earnings, then UK unemployment, and finally the 6th and final budget of this parliament from the Chancellor George Osborne. The minutes are unlikely to throw up too many surprises, but as ever average earnings and unemployment will be critical in “cost of living” specifically, and overall economic terms. The budget is an interesting one, because the Chancellor has a great story to tell of an improving economy and one wonders whether this, coupled with a couple of vote winning giveaways, might be the only real news from the day, rather than any real substance or plans for the future. Either way the markets will be keeping a very close eye on what he has to say, as well as digesting the results of the earlier data releases, so we could see some significant moves if any curve balls get thrown.

In addition the Fed also delivers the US’s monthly policy statement tomorrow evening, so any Dollar buyers should also be wary of further moves and possible further falls as the US moves closer to interest rate rises.

As ever stay in close contact with your CI account manager to be kept fully abreast of what is happening with the various data releases and how they are impacting the markets, and therefore your upcoming currency requirement.