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It was a quiet day’s trading on Friday with the majority of sterling crosses trading within a relatively tight range. GBP/EUR and GBP/USD didn’t move out of a 50 pip range for the whole of the London session, touching highs of €1.1752 and $1.2510 respectively.
GBP/EUR 1 week exchange rate graph
GBP/USD 1 week exchange rate graph
This was in spite of better than expected data out of the UK in the morning. The UK released their Month on Month Manufacturing production figures at 9:30 and following the trend of the majority of data releases from the UK, they didn’t disappoint. The figure came out at 2.1% which was a huge increase on the anticipated 0.3%. There was some support for the pound on the back of the reading which was short lived and soon dropped to levels lower than the day’s opening.
In usual circumstances the data releases the UK are currently publishing would cause more positivity in the exchange rates and investors would be backing the pound. Construction, Manufacturing and the Services sector are all showing expansion, inflation is steadily growing and GDP figures are showing positive numbers. All of this would usually help strengthen a currency but in the current climate the pound is still weak. This is mainly down to the referendum we witnessed in June and the continuing political story surrounding the triggering of Article 50. As we will be entering the unknown once Theresa May gives the go ahead to begin divorce proceedings from the EU investors seem concerned over the short term future of the UK and the economy. This is stopping the pound from hitting the dizzy heights of €1.20+ and an uncertain time is expected for the short term future of the pound.
The week ahead
The previous week has been rather quiet on the data front but this week does bring with it some key pieces of economic data from the UK the US and the Eurozone. Let’s take a look at what could affect markets this week.
We start the day with the German Preliminary GDP. With the Germans being the Eurozone’s powerhouse this reading is always deemed as important and can have a high impact on EUR crosses. The UK will release their CPI reading at 9:30 with a prediction of 1.9% any deviation from this will cause volatility for GBP exchange rates. Keep a look out for this reading if you have a requirement this week which involves the pound. We finish the day with the US PPI reading and a speech from FED chair Janet Yellen.
Wednesday brings with it the UK’s employment data in the form of Average Earnings, Claimant Count Change and the Unemployment Rate. Again, these releases can effect GBP crosses. It is a busier day across the Pond with the US publishing their CPI, Core CPI and their retail sales. There will also be Crude Oil Inventories and a few speeches from members of the Federal Reserve.
A quieter day today with the only real data to note coming from Australia who release their Employment Data. The US will release their Unemployment Claims and Building Permit Figures. There will also be some minor data from the Eurozone.
Only one piece of data that could affect markets today. It comes in the form of Retail Sales m/m from the UK. The previous reading came in at -1.9% so an improvement will be expected.
As regular readers will be aware, it isn’t only economic data that can affect the markets and exchange rates especially in the current climate. Any news from political heads of states can move markets drastically and if any heads of central banks head at interest rate hikes or cuts markets will react accordingly.
With this in mind it can be a real headache trying to digest all of the factors that can effect exchange rates and when you are in the midst of an overseas house purchase or if your business is expanding and taking on new contracts from overseas suppliers a contact at a currency specialist like Foremost Currency Group will be key. Not only can we source an exchange rate that is better than using your bank we can also assist you with the timing of your currency transfers which can make a huge different to your budget or bottom line.
Click on the link to open a free trading facility and discuss your requirements with one of our expert brokers.
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