Monday 19th January 2012
Good morning, and welcome to another new week in the currency markets. It should be an interesting one, with both the UK Budget and BoE minutes being released on Wednesday. With GBP/EUR rates remaining above €1.20, will they go up or down in the next few weeks or months? Let’s move on to the Monday roundup of last weeks movements, and see what’s in store this week.
In this week’s Report:
- UK Budget this week could affect Sterling
- Pound/Euro rates remain above €1.20
- Credit Rating downgrade threat for UK
- Round up of the week’s data that may affect rates
Sterling vs. Euro;
Today we will look in detail at the following…. Last week saw the Euro zone finance ministers finally approve the second Greek bail-out package, Increased UK unemployment rates and Fitch’s warning that the UK’s credit rating changing from stable to negative. Market movement’s saw the week open in the 1.18’s, ending back near the 1.20 level (Interbank):
The start of last week saw euro zone finance ministers agreeing the second Greek Bail-out package. Attention then moved to Spain as the government confirmed the nation would not meet the EU deficit goal for 2012 as the economy looks set to enter into a recession. European Central Bank President Mario Draghi called on banks and governments to make the most of a lull in the sovereign debt crisis.
Markets took the comments as a hint that the lull in the Eurozone crisis could be short lived. This was reflected within the market as we saw level’s move up towards the 1.20 mark nearing the 16 month high we saw in January. Why has Pound/Euro rates gone up? It’s due to fears the debt crisis will rear it’s head again soon, weakening the Euro.
UK unemployment rose by 28,000 to 2.67 million during the three months to January, with the unemployment rate at 8.4%, according to figures from the Office for National Statistics (ONS). The rise in unemployment was the lowest rise in almost a year and has said to be “stabilising” (Employment Minister Chris Grayling).
The unemployment news followed some more positive data for the UK economy as retail sales rose by a surprise 0.9% in January as fears of a recession fade, seeing Sterling strengthen against the Euro.
Fitch warned that it could downgrade the UK in the next few years if the government does not contain the level of public debt. The warning comes as Chancellor George Osborne puts the finishing touches to this year’s Budget. This week could see increasing volatility for the GBP/EUR as the Bank of England minutes and the Budget are announced on Wednesday.
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Weekly Economic Data that may affect exchange rates
Monday – We kick off the week with Rightmove House Prices. Shortly after the EU releases construction output. In the states we have a FED speech, and the housing market index. Finally in Australia there is a speech by an RBA member.
Tuesday – Starting in the UK we will see Retail Price Index, Consumer Price Index and the CBI Industrial Trend survey. EU data comprises of inflation numbers from Germany. US Data is Housing Starts and Building permits.
Wednesday – Of huge importance today is the UK budget. This could contain some surprises and so we expect a volatile day for Sterling. Also today we will see the Bank of England minutes to their recent decision to hold interest rates and QE. It will be interesting to see discussions and votes and this could affect Sterling. In the USA there are some Home Sales figures. In New Zealand there are GDP figures which could affect GBP/NZD rates.
Thursday – Retail Sales are released in the UK today. In Europe we have a host of inflation numbers in addition to Industrial New Orders. Later in the data EU Consumer confidence figures are releases. Stateside we have Jobless claims.
Friday – A quiet end to the week with US Home Sales the only data of note.
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