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Darren Kilner

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When to buy Currency, Know when to buy Euros and Dollars

Disclaimer: THIS MATERIAL IS NOT INVESTMENT RESEARCH AS DEFINED BY THE FINANCIAL CONDUCT AUTHORITY

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CURRENCY SNAPSHOT

EUR – The Euro has weakened as bond purchases have increased for May
GBP – Sterling holds firm despite weak inflation data yesterdaY
USD – Eyes turn to the FOMC meeting minutes this evening

YESTERDAY

Overnight we had Australian monetary policy meeting minutes. These did not cause any significant movement, however these minutes are useful for gaining an insight to the workings of a central bank and their thought process. This was followed by inflation expectations from New Zealand, which was stronger than previous strengthening the New Zealand Dollar.

CPI was then released from the UK, which showed the UK has entered in to deflation. Sterling lost ground following this, as the figure of -0.1% was worse than expected. German ZEW economic sentiment was released at 10am, and the negative reading showed that economic analysts were more pessimistic about the German economy than they had previously been.

In the afternoon we had building permits from the US, which came in better than expected. This gave the US a bit of respite, following all the recent negative data. The Global Dairy Trade Index rounded off yesterday and this once again came in negative, weakening the New Zealand Dollar.

TODAY

Overnight Japan’s preliminary quarterly GDP figures were released, and these came in above expectations at 0.6%. This helped out the Japanese Yen as the fears of a slowdown in Asia.

At 9:30 we had the official MPC bank rate votes from the UK. These votes decide on how MPC members feel interest rates should be moved in the UK. It was forecast that all members would vote for rates to remain the same, and as this came in as expected there was minimal movement in response.

In the afternoon we have monthly wholesale figures being released from Canada. In the evening we then have FOMC meeting minutes from the US. It will be interesting to see what forward guidance is given, and that will dictate how the US Dollar moves this evening.

Wednesday 20 May 2015, 09:59am

CURRENCY SNAPSHOT

EUR: Greece negotiations continue, but positive GDP results bolsters the Euro.
USD: Remains pressured as Friday’s consumer confidence data weighs on the dollar
GBP: Continues to remain strong following UK elections. Markets await inflation data to see if the UK has slipped into deflation this week.

LAST WEEK

The week started off with the Chinese central bank cutting interest rates for the second time this year, amid continuing economic slowdown in the country, in an attempt to boost development.

In the UK, the Bank of England kept the benchmark interest rate unchanged at all-time low of 0.5% and left the size of its asset purchases at £375 billion. With economists pushing back any expectations of a rate hike until early 2016. On Tuesday, UK manufacturing production rose more than expected in March, while industrial output also overshot economists' forecasts and NIESR estimated UK GDP rose 0.4% in the three months through April. Unemployment in the UK fell to 5.5% from 5.6%, with average earning also higher. The BoE returned to the limelight later in the week as Governor Mark Carney presented the Quarterly Inflation Report. The report revised down growth for 2015 and said it sees CPI inflation rising "notably" and hit the 2% target in Q2 2017, though it may turn negative in the short term.

Greece was as ever the talk of the Eurozone, with Eurogroup Chair Jeroen Dijsselbloem reported to have stated that some progress has been made and Greece paying back the €744 million to the IMF on Monday, a day early, thus avoiding the prospect of default, though for as long as this ongoing Greece situation continues to drag on, the Euro will remain vulnerable to losses. That wasn’t the case though last week as the Euro found strength against the dollar and pound with Eurozone as GDP growth improved slightly to 0.4% q/q in Q1 and 1% y/y in line with consensus.

In the US, job openings fell below 5 million in March, pointing to a slight decline in the jobs market at the end of Q1 this year. US retail sales also disappointed, by failing to hit forecasts again, further casting doubts about the health of the U.S. economy. The dollar lost ground across the board and fell to the lowest levels against the pound this year. The week ended with little news of importance, though the University of Michigan Consumer Confidence survey showed a disappointing reading of 88.6 vs an expected 95.9.

THIS WEEK

The week will start off quietly with data today from the ECB regarding its recent asset purchases followed by housing data from the U.S.

Central bank meeting minutes will be the theme of the week with releases from the Reserve Bank of Australia tomorrow, the Bank of England and Fed on Wednesday and the European Central Bank on Thursday. Markets will be looking for any forward guidance on the timing of rate hikes in the U.S. and UK.

Inflation data will also be of high importance, with UK and Eurozone CPI due tomorrow and US CPI on Friday. UK inflation is expected to return a 0.0% reading, though any negative reading will put the UK into deflation and pressure the pound.

In addition, UK Retail sales on Thursday will be watched closely as a measure of economic recovery and speeches from the ECB, Fed members and BoE throughout the week should provide more forward guidance and the EU Summit at the end of the week is likely to produce further comments on the status of Greek negotiations.

Monday 18 May 2015, 10:12am

CURRENCY SNAPSHOT

EUR: Recent data allows the Euro to continue to strengthen against the US Dollar
USD: The US Dollar continues to struggle as weak data continues to come out of the US
GBP: Sterling is still buoyant following the election

YESTERDAY

Compared to Wednesday, yesterday was relatively quiet on the data front due to the bank holidays in Europe and lack of data from the UK. In the afternoon we had monthly PPI data from the US along with unemployment claims data. This was a mixed bag, as the unemployment data was slightly stronger, however the PPI reading came significantly worse, at -0.4%. The Dollar hit a 3 month low yesterday.

President Darghi spoke in the afternoon as well. He forewarned that current measures taken by the ECB will likely lead to a rise in inequality. However he said positive inflation would benefit everyday people, and that negative inflation would be worse than rising inequality. He also dampened any expectations that interest rates could rise in Europe.

TODAY

One week on from the election, as the new Conservative government grounds itself Sterling has been buoyant, as was the case following the Scottish referendum. A notable gain has been made against the US Dollar, with Sterling gaining nearly 8.3% from the lows of last month.

Despite the positive move for Sterling, the new government has been looking to push forward the referendum on the UK staying in the EU, with Mark Carney encouraging this. Therefore the referendum could now be taking place in 2016 and will mean another year with a significant political event in the foreign exchange calendar.

Today will be a quiet end to the week. This morning we had Bank of Japan Governor Kuronda speaking, however this had a minimal impact on the Japanese Yen. This afternoon manufacturing sales are being released from Canada. Last month there was significant movement on the back of this data so could be one to watch for those involved with the Canadian Dollar. Following this we have consumer sentiment from the US which could shake up the recent weakening of the US Dollar.

Friday 15 May 2015, 10:29am

CURRENCY SNAPSHOT

EUR: Following disappointing German figures, will be hoping for better figures later
USD: Fairly quiet this morning looking for some positive retail figures
GBP: Will be looking to continue its recent rise with expectations of positive data.

YESTERDAY

We see a continuation of the pound rally yesterday which was prompted by some very positive economic data. UK industrial production was expecting an increase up to 0.2% from 0.1%, but the actual figures was 0.7%. At the same time manufacturing production was released; expected at 1% it came out at 1.1%. As a result the pound gained a cent against the euro and the dollar and similar amounts on a whole basket of currencies. In the afternoon we saw the release of the UKs GDP estimate which came in better than expected at 0.4% versus 0.3%. As a result the pound gained further ground.

Two highlights came from yesterday's Ecofin meeting, the first of course being the announcement that the ECB has increased the emergency funding ceiling for Greek banks by €1.1billion to €80 billion. The other was that George Osborne chose to bide his time and didn't push UK renegotiations.

TODAY

Today there is a raft of data expected from all corners, German CPI and GDP have already been released, CPI is better than expected at 0.5% following consensus of 0.4%. GDP was slightly lower than expected at 1.1% following forecast of 1.2%.

Average earrings will come from the UK later and is expected to be higher than last time at 2.1% from 1.8%, and the unemployment rate is expected to fall to 5.5% from 5.6%.

Eurozone GDP is expected to improve from 0.9% to 1.1%, and industrial production is also expected to go from 1.6% to 1.8%.

The big news out of the UK will likely be the BoE inflation report hearings and governor Carney's speech. With various banks and economists suggesting a rate hike could come in Q3 2016 or even later, we hope Carney will give a more precise indication of the BoE's view. To round off the data for the day we have US core retail sales also expected to improve from 0.4% to 0.5%.

Wednesday 13 May 2015, 09:45am

CURRENCY SNAPSHOT

EUR: Remains pressured, but Greek debt payment today will help reverse some losses
USD: The dollar remains pressured as Friday's jobs report weighs on the currency
GBP: Rallies across the board on renewed optimism following the UK elections

YESTERDAY

The pound rallied to new highs against the Euro and dollar yesterday, as markets shifted their focus to positive economic data rather than political uncertainty in the UK following the elections.

In addition, The Bank of England's monetary policy committee kept its benchmark interest rate unchanged at 0.5% and maintained its QE programme at £375M, as expected. No statement was made by the Governor of the BoE, as we should hear from him on tomorrow at the Quarterly Inflation report.

The statement from the Eurogroup meeting last night welcomed the progress made on Greek negotiations and Greek Finance Ministry confirmed that it had ordered the €750M payment to the IMF, which is due today. The payment will end uncertainty of a Greek default today and could provide the Euro with some support.

TODAY

Another quiet day on the data front with UK Industrial and manufacturing production expected to show a small decline in the month on month figures, followed by the UK GDP estimate which will be watched closely as growth targets are likely to be mentioned in tomorrow's quarterly inflation report by the BoE.

Elsewhere, Australia and the U.S. will release budgets and the Reserve Bank of New Zealand will publish its financial stability report alongside a speech from Governor Wheeler.

Tuesday 12 May 2015, 09:42am

CURRENCY SNAPSHOT

GBP: Pound to be guided by the Bank of England’s quarterly inflation report.
EUR: €750m IMF repayment due by Greece this week.
USD: Minimal data out of the US this week with only retails sales in focus.

LAST WEEK

Unsurprisingly much of last week was overshadowed by the UK general election with the pound flourishing by Friday following the surprising outright victory by the Conservatives.

Data earlier in the week showed that the services sector expanded further than expected to 59.5 in April, leading to data agency Markit suggesting that 2nd quarter GDP should increase to 0.8%. PMI construction and goods trade balance fell short of expectations however coming in at 54.2 and £10.122bn.

In the Eurozone, investors took comfort from Greece being able to make its €200m repayment to the IMF. On the data front Eurozone services and manufacturing expanded further to 53.9 and 52 respectively.

Soft US economic data continued to weigh on the dollar with services PMI slowing down 57.4 and ADP and non-farm payroll data showing that only 169,000 and 223,000 jobs were added in April, short of the 200,000 and 224,000 that were expected. The unemployment rate however did decrease to 5.4%.

Elsewhere the RBA decided to cut interest rates to 2% and the unemployment rate increased to 6.2% and the unemployment rate in Canada remained at 6.8%.

GBPUSD finished 1.95% higher on the week, GBPEUR 1.73% and EURUSD finished 0.07% higher.

TODAY

The Bank of England will be in the limelight with the release of its latest interest rate decision as well as the Quarterly Inflation report. Economists say there is a high chance that Carney will use the latest forecasts for growth and inflation to warn markets they are too relaxed about the timing of an interest rate hike and that it will come sooner than traders are pricing in. Economists also expect the unemployment rate to edge down further to 5.5% in the three months leading in to March, after 5.6% in the three months to February. Earnings, meanwhile, are expected to grow at an annual pace of 1.7%.

It’s a new week, but the same old story with Eurozone finance ministers gathering in Brussels this afternoon to discuss the Greek debt crisis. Tomorrow we see Greece having to repay around €750m (£540m) to the International Monetary Fund (IMF). The two events had been widely linked. It was assumed that the cash-strapped Athens government would be unable to meet its obligations to the IMF without a cash-for-reforms deal with its creditors that would release more than €7bn. On Wednesday we also see preliminary 1st quarter GDP figures released across the single bloc

Data out of the US is minimal with investors looking out for retail sales and consumer sentiment for fresh indications on the strength of the economic recovery.

FairFX Currency Card Rates at 10:00 (11/05/2015):

EUR - €1.3680 to £1
USD - $1.5268 to £1

Monday 11 May 2015, 10:04am

Election

GENERAL ELECTION IMPACT

Forecasts for the election polls suggested that the 2015 General Election was going to be one of the closest in decades. A hung parliament was expected to be the outcome, with most polls showing the Labour and Conservative parties were neck and neck. SNP was forecast to be the third largest party.

At 10pm yesterday, the Exit Poll was released, and the Conservatives were forecast to win 316 seats. In 2010, the Exit Poll was nearly 100% accurate, and Sterling significantly strengthened following this. However, as this result was so far from what opinion polls had suggested, there was still scepticism for what the final result would be. Lord Ashdown declared on television that he would eat his hat if the result was this bad.

However, as the night went on and more results were announced, the exit Poll had in fact understated the Conservative win. Final results are likely to give the Conservatives a majority with 329 seats. This further strengthened Sterling this morning as a more stable government appears to be on the cards.

With the Conservative success, came a number of high profile casualties. Most notably Ed Balls, shadow chancellor, lost his seat – topping off a particularly poor night for Labour. A number of high profile Liberal Democrats also have lost their seats, with the Liberal Democrats forecast to win only 8 seats.

Across the day, Milband and Clegg could resign which would likely further solidify Cameron’s position.

The markets have moved significantly following the election, as was expected. In a similar way to how the Scottish Referendum buoyed Sterling, the 2015 General Election has also led to Sterling significantly strengthening.

MARKET DATA

Apart from the election result, we also have some data being released this afternoon. We have employment data from Canada this afternoon.

Furthermore, we have non-farm employment data from the US.

It will be interesting to the impact this data could have, as the UK General Election could overshadow this.

Friday 08 May 2015, 10:12am

CURRENCY SNAPSHOT

GBP - UK services grow to a seven month high but election concerns weigh on the pound.
EUR - Optimism over Greece supports the euro as the single bloc currency continues to gain.
USD - Poor job figures continues to add to concerns over the US economy.

YESTERDAY

Despite the UK service sector jumping to an eight month in April from 58.9 to 59.58, the data did little to support the pound as uncertainty surrounding the election results still weighed on the pound. UK services make up two thirds of UK GDP and the data suggests that the economy could grow as much as 0.8% in the second quarter, up from 0.3% in the first quarter.

Eurozone composite showed steady growth for the region rising from 53.5 to 53.9 in April, whilst retail sales for the region, year on year, fell to 1.6% in March from 3% in February. Whilst the data was mixed, the euro caught some relief as Greece was able to make its €200m interest repayment to the International Monetary Fund. Their next payment is set to be a staggering €744.9m due by the 12th May. Later in the evening the ECB also announced that Greek bank will be given an extra €2bn in emergency liquidity.

Stateside, the latest ADP job figures fell short of expectations down to 169,000 from an expected 200,000 casting doubt over Friday’s non-farm payroll figures. Concerns over the economy continue to weigh on the dollar, with the currency continuing its downward trend from April.

By the end of the day GBP/USD rose by 0.43% and GBP/EUR fell by 0.94%, taking its losses from last week to 4.3%.

TODAY

Overnight data from Australia showed that unemployment increased as expected to 6.2% from 6.1% with the participation rate also remaining at 64.8%. German factory orders increased to 1.9% from -1.3% causing the euro to continue its strength against the pound

Unsurprisingly the main event today will be the UK elections and markets will remain cautious ahead of the results tomorrow morning.

The only other notable event on the calender will be initial jobless claims which is expected to increase from 262,000 to 280,000.

Thursday 07 May 2015, 10:22am

CURRENCY SNAPSHOT

GBP – Services PMI data out, UK election still the overriding concern.
EUR – Services PMI largely positive reinforcing gains against the Dollar.
USD – Fed Chair Yellen to speak this afternoon in Washington D.C.

YESTERDAY

In the early hours yesterday morning Australia cut their interest rate as expected to an all-time low of 2.00%. This moves them closer to other developed countries however housing bubble concerns could prevent any further cuts.

Also in the morning Spain released their monthly Jobless Claims figure which was dramatically positive at -118.9k (expected to be -64.8k). This reading continues a run of positive data for the Spaniards but failed to impact the Euro significantly.

UK Construction data was a negative 54.2 (expected 57.6) which indicates that the industry is still growing however not at the pace that was expected.

In the afternoon the US had their Trade Balance and Non-Manufacturing PMI which came in at -51.4B and 57.8 respectively. The negative Trade Balance figure outweighed the positive Non-Manufacturing resulting in a further drop on the Dollar

TODAY

Overnight New Zealand suffered the release of terrible employment numbers sending GBP/NZD back to a weekly high.

Early Services PMI figures from the Euro area have been almost entirely positive (German figure excepted) causing a fall in GBP/EUR this morning. The UK Services PMI figure will be out at 09:30 and is expected to drop 0.3 to 58.6, although the effect of all UK data is muted at the moment with the election less than 24 hours away.

The Dollar will dominate the afternoon with ADP Non-Farm Employment Change kicking things off at 13:15 followed by Fed Chair Yellen speaking at 14:15. The Dollar has lost over 1.5 per cent to the Euro over the last 24 hours and could use a positive reading and an upbeat talk by Yellen to stem the tide.

Wednesday 06 May 2015, 10:01am

CURRENCY SNAPSHOT

GBP - the General election could cause havoc in the markets this week
EUR - has had a positive start to the week and will hope that this move will continue
USD - the main focus for the week will be non-farm payrolls on Friday

YESTERDAY

As the UK was offline yesterday it was at the mercy of both European and American news. For most of the morning the currency markets remained flat. Early in the morning Chinese manufacturing PMI came out lower than expected at 48.8 versus 49.4, but this seemed to have little impact on the market.

Later German manufacturing PMI came out and was slightly better than previously at 52.1 following 51.9. This gave the Euro a bit of a boost.

Elsewhere US factory orders for March came out slightly better than forecast at 2.1%, up form -0.1%. Following this the dollar pushed a little higher.

TODAY

Today will set the tone for the rest of the week. We will see the release of UK construction PMI which is expected to fall from 57.8 to 57.4.

The US. trade balance is expected to be lower than previously at -39Bln from -35.44Bln, and later on the US non-manufacturing PMI will be out and is expected to remain at 56.5.

For the rest of the week focus will be on a raft of PMI data out of Europe along with retail sales. Thursday is of course the UK’s general election and should be the main talking point. This could create a lot of uncertainty in the UK and for the pound with the polls suggesting a hung parliament is the most likely outcome. On Friday morning the market will struggle to find a reason for the pound to push higher.

Also on Friday we will see the UK trade balance which should be better than a month ago and non-farm payrolls will be the focus from the US.

Tuesday 05 May 2015, 10:39am

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