Pound outlook week commencing 9th November

Good Morning. The pound rose slightly towards the end of last week, helped by the fact the Bank of England didn’t extend the Quantitative Easing measures as much as some had forecast. At 08:30am Monday morning, rates stand as follows:

  • GBP/EUR 1.1203
  • GBP/USD 1.6772
  • GBP/AUD 1.8088
  • GBP/NZD 2.2761
  • GBP/CAD 1.7830
  • GBP/CHF 1.6919
  • GBP/ZAR 12.451
  • GBP/JPY 151.08
  • EUR/USD 1.4966

Sterlings gains
Sterling pared gains against the US Dollar at the ends of last week as a weaker US jobs report left investors more averse to risk and offset the boost to the UK currency from the previous days Bank of England decision.

However, the pound stayed not far from a two-week high against the dollar hit after the central bank on Thursday increased its quantitative easing programme by £25bn , less than the £50bn rise many had forecast.

The top-up to QE broadly supported sterling, particularly as many in the market believe this will be the last time the bank has to pump money in. With the BoE meeting over, analysts said the market would focus on the bank’s quarterly inflation report this week.

Under its QE programme, the BoE has since March been buying assets to inject liquidity into the economy. This contributed to recent sterling weakness which saw the pound touch a five-month low against the dollar in October.

However, the overall view that the BoE will maintain economic stimulus and keep interest rates low perhaps for longer than other central banks is seen limiting further gains. As other economies recover faster and start raising rates, their currencies will strengthen. The pound is likely to lag behind given that our rates are not likely to be raised until well into next year.

This Weeks Data
We have lots of data from the UK, EU and US this week that will no doubt cause volatility in exchange rates. Let’s take a look at each zone, and the key pieces of data to watch out for.

UK
We have various house price measures on Tuesday. Recently prices have been rising helping to strengthen the pound, but many analysts are saying this will not last. Any decline in the recent rise could cause the pound to weaken and exchange rates to fall.

There is some unemployment data on Wednesday, along with a speech from the Bank of England where a press conference will show how the BoE observes the current UK economy and the value of the GBP. His comments may determine a short-term positive or negative trend.

EU
We have inflationary measures, and also the Gross Domestic Product data on Friday. The GDP is considered as a broad measure of the Eurozone economic activity and health. A rising trend has a positive effect on the EUR, while a falling trend is seen as negative.

US
Thursday sees Jobless Claims, and Friday we have Import Prices, Trade Balance, and consumer sentiment which is a survey of personal consumer confidence in economic activity. It shows a picture of whether or not consumers are willing to spend money.

Monday
Aus – Investment Lending
Ger – Trade Balance
Ger – Industrial Production
Can – Housing Starts

Tuesday
UK – BRC Retail Sales
UK – RICS House Prices
Ger – Consumer Price Index
UK – DCLG House Prices
Ger – Economic Sentiment
US – Consumer Confidence

Wednesday
UK – Average Earnings
UK – Jobless Claims
UK – Unemployment
UK – BoE Speech
NZ – Retail Sales

Thursday
Aus – Unemployment
EU – ECB Monthly Report
EU – Industrial Production
US – Jobless Claims

Friday
Ger – Gross Domestic Product
Swi – Producer Prices
EU – Consumer Price Index
EU – Gross Domestic Product
US – Import Prices
US – Trade Balance
US – Consumer Sentiment


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