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Market Report 5th May 2016

CURRENCY SNAPSHOT

GBP- UK construction industry posts worst result since June 2013
EUR- European services sector growth slows in April
USD- US Dollar movements sensitive to speeches by US financial officials

ROUNDUP

Yesterday morning saw a raft of European data miss expectations for April but it did little to move the rates significantly. In a round up of service sector growth, only Italy improved on the previous month and was joined solely by Spain in beating expectations. The Eurozone’s retail sales data for March showed a slowdown and a reduction compared to the month prior.

The UK’s construction industry also showed a slowdown in April, falling to the lowest level of growth since June 2013. This follows the poor manufacturing data from Tuesday and adds weight to the argument that the UK economy is stalling ahead of the EU Referendum.

In the afternoon, employment figures for the US fell significantly below expectations and lower than the previous reading. However, positive services sector data and suggestions of a Fed interest rate rise in June from a number of prominent officials helped the US Dollar to remain steady against the Pound.

COMING UP

The afternoon is fairly quiet with only the weekly jobless claims from the US being released. This afternoon and evening will see numerous US financial officials speaking which could boost the Dollar overnight depending on their tone.

The Chinese services sector softened in April although this has not had the effect on the commodity currencies that it usually causes.

Overnight, Australia released several pieces of positive data which helped the Australian Dollar to regain some ground against Sterling after recent losses. Retail sales beat expectations, while home sales as well trade balance results all improved. The Aussie Dollar could continue to gain off the back of this.

Thursday 05 May 2016, 10:17am

Market Report 4th May 2016

CURRENCY SNAPSHOT

EUR: Growth forecasts cut by the European Commission.
GBP: UK manufacturing drops as EU referendum remains a concern for businesses.
USD: Dollar got some respite after Atlanta Fed President suggests two rate hikes this year.

ROUNDUP

Sterling suffered a poor day yesterday, dropping against a basket of currencies, with notable falls against the euro and US dollar.

The main reason that we can attribute to this was UK manufacturing suffered its worst performance in three years, now in contraction territory. British companies seem to be suffering a double-blow, with domestic demand softening and new orders from overseas falling too on account of the uncertainty surrounding by the June referendum and a general slowdown in global demand.

The European Commission cut its forecast for Eurozone growth yesterday but the data did little to weaken the euro. The EC also admitted that its previous inflation forecasts were too optimistic - predicting that prices will only rise by 0.2% this year.

The US Dollar got some long awaited respite yesterday after Atlanta Fed President Dennis Lockhart said two further rate hikes could be seen this year, depending on how the US economy evolves and also if there are any repercussions following the EU referendum.

US dollar also drew some support after the New York manufacturing survey showed business activity grew at its fastest pace since December 2015.

COMING UP

Today we find out how the Eurozone’s service sector performed last month. It may show that European consumers kept spending, despite signs of weakness in the global economy.

US ADP job figures are out this afternoon which could give some guidance to Friday's all important non-farm payroll figures. US service sector figures are also out today which are forecast to improve marginally.

UK construction is expected out this morning and we could well see a further slowdown in the sector following the poor manufacturing figures from yesterday and thus we could see more weakness in the Pound.

Overnight New Zealand employment data disappointed with the unemployment rate increasing more than expected for the first quarter. Market reaction was indecisive with the GBP - NZD rate swinging in both directions initially before the rate climbed by 0.25% today.

Wednesday 04 May 2016, 10:32am

Market Report 3rd May 2016

CURRENCY SNAPSHOT

EUR – The Euro has remained relatively strong on the back of yesterday’s strong manufacturing figures.
GBP – Sterling has initially dropped off following poor manufacturing data released this morning.
USD – The Dollar has lost ground as expectations for a US interest rate rise have lowered.

ROUNDUP

Across the course of last week the US Dollar weakened off and the reason for this was poor data and the Federal Reserve statement suggesting that the US will be delaying the next interest rate rise. As a result, Sterling has now reached a 4 month high against the US Dollar. The Euro is also currently trading against the US Dollar at the best rates since August 2015.

The main thing of note last week was the UK’s preliminary GDP figure which came in line with expectations, solidifying Sterling.

The Euro was seen as the strongest performing currency, strengthening from Wednesday onwards. Strong manufacturing figures yesterday from Europe contributed to this as well.

Overnight Australia shocked the markets by lowering interest rates, and the Japanese Yen remains strong as expectations for further quantitative easing were not satisfied.

COMING UP

There is not much significant data from the Eurozone this week following yesterday’s manufacturing figures. The main thing to watch for is the Services figures being released from Europe on Wednesday.

There will be a significant focus on the US this week, with the jobs data being released. ADP non-farm employment change is released Wednesday afternoon, and the non-farm employment change is being released Friday afternoon. Along with this, manufacturing figures are being released from the US Wednesday afternoon.

The UK’s manufacturing, construction and services figures are being released across the course of the week. Manufacturing PMI has a shown a contraction in this sector of the UK’s economy, which appears to have initially weakened Sterling. There will be a particular focus on Thursday when the services figure is released, as services is the largest part of the UK’s economy.

Tuesday 03 May 2016, 11:28am

Darren Kilner

Darren Kilner

Head Of FX & Dealing

Email Darren

Call us on 020 7778 9350