It has been a very volatile week for Sterling, which has remained on the back foot despite the relatively optimistic public sentiment surrounding the Pound.
We saw the Purchasing Managers’ Index (PMI) numbers generally failing to impress at the start of the month. This indicated that although order books are busier than they were a month ago, the pace of growth is perhaps slowing, something we have seen in GDP numbers over the past few quarters too.
From the continent, it is very difficult to draw a coherent conclusion. On Wednesday morning, Mario Draghi revised up the growth forecasts for the Eurozone and stated that he expected Greece to make their debt repayments on time. By Thursday evening,
Greece had signalled they were not going to be paying on time, and doubts had been cast as to other key indicators about the European recovery. Across the pond, we saw more names throw their hats into the ring to be the next president. Although the election is still 18 months away, there are some early signs that political instability is likely throughout 2016. Friday’s Non-Farm Payrolls number came in at +280,000, better than the forecast of 225,000 and last month’s 223,000, indicating that despite some pessimism surrounding the US recently, their economy is still outperforming most in the world.
There was no action from either the Bank of England or European Central bank at their meetings, although Mario Draghi did revise upward the growth forecasts for 2015 and 2016, and also stated the he believed inflation had bottomed out and would rise through the latter half of the year.
Looking to the week ahead, it is relatively quiet on the data front, so currencies will be allowed to float on their natural strengths, but will be more sensitive to any unexpected announcements from policymakers. There is a G7 meeting over the weekend that stretches into Monday, with markets likely to be paying attention to any headlines emerging from the conference.
Tuesday sees Mark Carney speaking at an event. Although he rarely gives major policy clues, and the Bank of England seems to be sitting on their hands for the time being, there have been hints in recent MPC minutes that some members feel a discussion on rate hikes is warranted despite inflation being at zero, so any clues from the governor will be closely analysed.
The back end of the week is dominated by US Data, with retail sales expected to rise on a monthly and annual basis, and unemployment set to drop again. If these materialise, we could see the greenback recover some strength. Friday sees the consumer sentiment survey from the University of Michigan, a key indicator as to the level of confidence on the streets across America, with consensus expecting a slight increase at 91.3 compared to May’s 90.7.
By Matthew Harris of Cambridge Global Payments
In this week’s podcast, we explain why EUR rallied on Draghi, what’s next, discuss oil and gas, run through the Plus500 story and preview next week’s events.
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