US data could bring more exchange rate movement

30 July, 2014

Tom Arnold

As was widely expected, this week has so far turned out to be very quiet on the data front and as such there has been very little movement of note across the currency markets.

This could be set for a change as we draw towards the end of the week, with a few releases of note due out. The data we have due is mainly US based with US GDP and the Fed’s monthly policy meeting due today and employment data in the form of Non-Farm Payrolls, due on Friday. There is some European data also due with German CPI inflation today, then German retail sales and unemployment numbers, as well as overall Eurozone CPI inflation tomorrow.

On the US side of things, there has been a shift in sentiment in recent days with the markets looking more favourably upon the US Dollar, following some slightly more positive US data – highlighted yesterday by slightly better than expected housing numbers. The releases we have this week are key, so it will be interesting to see if they also give the Dollar a further boost… For those of you with a Dollar requirement we are just below 6 year highs at present, with the increasingly likely possibility of things dropping away, so it may well be worth considering booking your currency soon.

The European data we have due will give us some further indications as to the status of the Eurozone’s recovery. German data has not been that strong recently, and Europe’s largest economy needs to be firing on all cylinders for the overall group to succeed. 
More worrying though might be the ramping up of sanctions on Russia due to the Ukraine situation and specifically the shooting down of MH-17 – Europe and Germany particularly benefits from a massive trading relationship with Russia, which will obviously be damaged significantly by the sanctions – how will Europe recover if much of its foreign trade is hindered?

In the UK things are quiet, and the Pound is still doing well – a note of caution from the IMF though – who have said that the Pound’s ongoing strength is making the UK economy very dependent on imports, while damaging our ability to export. Our economic numbers look good, but a strong Pound should not be looked upon as a guaranteed result of a strong economy – if exports need to be improved you can expect the Bank of England and the government to act, which could mean the end for the current high buying levels for Sterling…

As ever keep in close contact with your CI account manager to be kept informed of exactly what is going on, how it will likely affect your upcoming currency purchase and what your options are.