Sterling continued to lose ground against most currency pairs last week following the domestic account deficit data and concern regarding the events unfolding in Crimea. Global Stock markets are struggling and due to the Pounds relationship with stocks, the upheaval has seen GBP firmly on the back foot. The referendum in Crimea could also have far-reaching economic and political implications that disturb the political balance in Europe and further afield.
The account deficit is also causing problems. According to the ONS the trade gap widened from £7.7Bn in December to £9.8Bn in January, and has BoE representatives concerned which has lead to a flailing Pound.
This week BoE Governor Carney speaks on Tuesday, which has the potential for considerable volatility. But the real movement is likely be seen on Wednesday, when 4 largely influential pieces of data are released at the same time, namely Claimant Count Change, MPC Asset Purchase Facility Votes, MPC Official Bank Rate Votes and the Unemployment Rate
The Euro continued to gain ground against the US Dollar and Sterling last week, following the powerhouse German consumer price index, which printed a rise of 0.5% in February. Employment in the Eurozone and the European Union as a whole also rose 0.1% in Q4 2013, which immediately saw the single currency appreciate and stands the Euro in good stead moving forward. This week the all-important German ZEW economic sentiment on Tuesday will give insight into the economic health of the Eurozone’s largest economy. This will give an indication of sentiment that will govern future economic activity and fundamentally the strength of the Euro moving forward.
Today however the Euro rate will be governed by the CPI y/y, which is considered the Eurozone’s most influential inflation data and is used to assess the central bank’s own inflation target.
The US Dollar continued its downfall last week following disappointing macroeconomic reports, which have lead to doubts that the FED will continue its quantitative easing tapering or even pause stimulus programmes all together until economic growth becomes more sustainable. The university of Michigan consumer confidence index surprisingly fell from 81.6 to 79.9 this month alongside the producer price index, which fell 0.1% in February against the expected 0.2% rise. This puts pressure on the US Dollar moving forward, and market participants are waiting anxiously for the next FED meeting to determine strategies policy makers will adopt moving forward.
Looking forward this week the influential FOMC Economic Projections and statement on Wednesday will give indications as to the FOMC’s projection for inflation and economic growth over the next 2 years, as well as each members interest rate forecast. Expect volatility leading up to and during this event.
Thursday then sees the release of the latest unemployment claims. Being a leading factor in the FED’s tapering decision, if this release indicates higher unemployment the Greenback may continue to weaken dramatically. Inversely, a positive print following on from the previous non-farm payroll data may see the US Dollar claw back losses as optimism returns to the market.
Courtesy of FC Exchange.