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GBP – will look to peg back some of its losses this week against euro with a decent start this morning on the stock markets.
EUR – the pick of the week again, winning against the pound on 10 of the last 11 weeks.
USD – bad week against the euro, flat against the pound.
World stock markets, particularly banking stocks, have had a horrendous week. Barclays, HSBC, Lloyds and Anglo American all saw big drops on the FTSE. On the continent Credit Suisse hit 25 year lows and Soc Gen dropped a whopping 12%.
All the volatility has seen the usual flock to safe haven assets, with gold up 15% since November and the yen and euro up to yearly highs against a whole host of currencies.
The main event of the week was the Fed chair, Janet Yellen, testifying in front of congress. She suggested that the Fed were intent on continuing on their path to normalization, however strongly stating that any more market turmoil could throw the Fed off course. She also refused to rule out a possible reduction of interest rates if overseas threats persist.
Overnight we had RBA Governor Stevens speaking, ruling out any more interest rate reductions for now.
Stock markets have had a decent start to the morning, the FTSE up almost 2% bouncing back from levels not seen since late 2012. This could see a wider move back into riskier assets throughout the day and possible euro weakness. This morning we’ve had German GDP figures, which came in as expected at positive 0.3%.
Later on we have US retail sales and consumer sentiment figures. Impact should be minimal as the markets are taking more note of wider economic conditions.
Friday 12 February 2016, 10:29am
EUR – Biggest winner of the day, strengthening over sterling and dollar
GBP – Saw some gains against the dollar during the market turmoil but weakened against Euro
USD – Saw losses across a basket of currencies as investors sell out of US based assets
The only noteworthy data out yesterday came from the UK and showed a slight decrease in the goods balance and trade balance in the UK for December. This is positive for the UK economy, as exports were boosted by the weakening of sterling in December.
Chancellor George Osborne warned that the economy is facing a "dangerous cocktail" of risks in 2016, ranging from slowing global economic growth to volatile stock markets and the continuing slump in oil prices.
The euro was the biggest gainer of the day as markets continued to seek safety as stock markets across the globe tumbled. Another possible reason for the euros strength has been cited that Eurozone banks are selling assets abroad and converting revenues into euros to shore up their balance sheets.
Economic growth forecasts for the Eurozone are released today, and investors will want to compare the stance of the European commission with the UK and will look to take up positions accordingly
GDP estimate for UK is released today which signifies a month before the actual figure is released. The previous figure was 0.6%, with some economists expecting this figure to drop which could see sterling weakness
All eyes will be on Janet Yellens speech in the afternoon, which is expected to have a slightly hawkish tone to settle global markets
Wednesday 10 February 2016, 10:38am
GBP - A very quiet start to the week for UK data leaves Sterling vulnerable
EUR - Strong day for the Euro yesterday following European Stock Market turmoil
USD - Labour data in focus ahead of more important releases later this week
The week started on a quiet note with a lack of data from the major currencies. The day was instead dominated by stock market turmoil that meant money flowed into the safe haven currencies and gold. As a result, Sterling struggled against the US Dollar and fell to fresh 12 month lows against the Euro.
In the afternoon, the US released its Labor Market Conditions Index which came in well below the previous reading. As it is still in positive territory, the labour market appears to be improving at a slower rate as the economy nears full employment which has been a factor for the Federal Reserve raising interest rates.
German Industrial Production figures for December have already been released and drastically disappointed, causing the Euro to weaken slightly. The German trade balance was published this morning as slightly less healthy than expected.
In the early part of the morning, the UK’s trade balance is expected to be a mixed bag with an improvement with Euro trade partners but a slight negative with other trade partners. This is unlikely to move the currency markets significantly which may again be dominated by the stock markets.
Further labour data will be published from the US this afternoon and is expected to show a slight improvement in the number of job openings taking place.
Tuesday 09 February 2016, 09:38am
Head Of FX & Dealing
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