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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

GBP: The Pound finds a new seven year high against the Euro.
USD: Dollar poised for a strong finish to the month.
EUR: ECB asset purchase considerations weigh on the Euro

YESTERDAY

The early Euro data made minimal impact yesterday, as did the Second Estimate GDP figure out of the UK which came out in line with expectations at 0.5%. The big move occurred after midday and GBP/EUR rose to a new seven year high, spurred on by interest rate considerations with the ECB’s asset buying program just around the corner.

On the flipside, Cable dropped quite sharply after the US released their Inflation and Durable Goods figures. Core CPI was a positive 0.2% (0.1% expected) and Core Durable Goods 2.8% (1.7% expected). The figures moved GBP/USD to a three day low and, combined with the earlier Euro data, moved EUR/USD 1.6% to the lowest level since January.

TODAY

The German Preliminary CPI figure is the first figure of note for the day and should set the tone for Euro moves.

The US also have their Quarterly Preliminary GDP reading out after lunch which is expected to fall 0.5% from 2.6% to 2.1%. This figure kicks off an afternoon of USD data which, if positive, and with the profit-taking and safe-haven currency factors taken into account, could send the Dollar into March on a high.

Friday 27 February 2015, 09:30am

CURRENCY SNAPSHOT

GBP: UK growth figure the main focus today, pound continues to hold its ground.
USD: Durable goods and inflation data this afternoon could see the dollar weaken further.
EUR: Greek debt dramas continues with comments from Greek finance minister and keeps the Euro pressured, other data largely ignored.

YESTERDAY

With no major economic data releases yesterday, markets were focussed on speeches for central bankers:

UK BoE Governor, Mark Carney spoke about how the central bank is planning to do much broader research, as part of a push to change the way it uses data and hence make better policy decisions.

ECB President, Mario Draghi continued to defend his stance on Greece, as he spoke before the European Parliament yesterday. Draghi stated that the ECB had no choice but to suspend its waiver on Greek bonds being used as collateral, but this could be reinstated if Greece get back on track with its bailout programme.

Fed Chair, Janet Yellen testified again yesterday and didn’t provide anything new or further forward guidance on monetary policy, as expected.

All in all markets were fairly quiet and trading remained in tight ranges, though the Euro slipped further following comments from the Greek finance minister who said that Greece will struggle to make debt repayments to the IMF and the ECB this year.

TODAY

German Consumer confidence survey has come in better than expected at 9.7 vs 9.5, and the country’s employment rate has remained constant at 6.5%.

Preliminary GDP figures will be released for the UK with little change expected, though growth will be watched closely.

In the US, durable goods orders and inflation figures will be in the spotlight this afternoon.

Thursday 26 February 2015, 09:42am

CURRENCY SNAPSHOT

GBP: Carney’s speech will most likely be quite soft and no forward guidance is expected.
USD: It seems as though Janet Yellen said all she needed to yesterday however she will be keen to gain back the dollar’s lost ground from this morning.
EUR: With Draghis speech on the agenda it is difficult to predict what he might say.

YESTERDAY

Yesterday there was quite a few releases and a couple of speeches for the market to sink its teeth into. The first thing out was higher than expected German GDP figures coming in at 1.6% versus 1.5%. Following this we had Eurozone CPI out at -0.6% as expected. Strangely the euro weakened off to a 7 year low against the pound and moved lower versus the dollar.

Following this the ECB president Mario Draghi spoke and said that the reforms submitted by Greece are "sufficiently comprehensive and should be approved by finance ministers". This is the most significant signal yet that Athens will get its €172bn bailout extended beyond Saturday's expiry date, and following this the euro clawed back all of its lost ground.

Markets became settled until Janet Yellen testified, she offered few clues as to the timing of any rate hikes. She did however say that in the march meeting they will drop their "patient" language. Following these announcement the dollar seemed to drop of a bit.

TODAY

This morning was the same story - cable has reached a one month high and the dollar has continued to lose ground against the euro. Today there is very little data being released but the central bank powerhouses - Mark Carney, Mario Draghi and Janet Yellen - are all due to speak.

Expectations are that Carney will be pretty coy but may speak about Greece and Draghi is expected to act like an ambassador for the Euro-Greek bailout plans. Both could translate into sterling losing some ground against the euro as the markets are placated. Yellen is expected to finish off from yesterday and without saying anything specific, giving room for further dollar weakness.

Wednesday 25 February 2015, 09:59am

CURRENCY SNAPSHOT

GBP: Carney’s speech will most likely be quite soft and no forward guidance is expected.
USD: It seems as though Janet Yellen said all she needed to yesterday however she will be keen to gain back the dollar’s lost ground from this morning.
EUR: With Draghis speech on the agenda it is difficult to predict what he might say.

YESTERDAY

Yesterday there was quite a few releases and a couple of speeches for the market to sink its teeth into. The first thing out was higher than expected German GDP figures coming in at 1.6% versus 1.5%. Following this we had Eurozone CPI out at -0.6% as expected. Strangely the euro weakened off to a 7 year low against the pound and moved lower versus the dollar.

Following this the ECB president Mario Draghi spoke and said that the reforms submitted by Greece are "sufficiently comprehensive and should be approved by finance ministers". This is the most significant signal yet that Athens will get its €172bn bailout extended beyond Saturday's expiry date, and following this the euro clawed back all of its lost ground.

Markets became settled until Janet Yellen testified, she offered few clues as to the timing of any rate hikes. She did however say that in the march meeting they will drop their "patient" language. Following these announcement the dollar seemed to drop of a bit.

TODAY

This morning was the same story - cable has reached a one month high and the dollar has continued to lose ground against the euro. Today there is very little data being released but the central bank powerhouses - Mark Carney, Mario Draghi and Janet Yellen - are all due to speak.

Expectations are that Carney will be pretty coy but may speak about Greece and Draghi is expected to act like an ambassador for the Euro-Greek bailout plans. Both could translate into sterling losing some ground against the euro as the markets are placated. Yellen is expected to finish off from yesterday and without saying anything specific, giving room for further dollar weakness.

Wednesday 25 February 2015, 09:55am

CURRENCY SNAPSHOT

EUR: Greece granted four-month extension of €240bn bailout.
GBP: Retail sales continue to grow, albeit at a slower than expected pace.
USD: Markets look forward to Janet Yellen’s speech on Tuesday for interest rate guidance.

LAST WEEK

It proved to be a busy week on the data front from the UK causing the pound to make a new 7 year high against the euro and a new one month high against the US dollar.

On Tuesday, data revealed that inflation in the UK had fallen to 0.3% in January from 0.5% in December, with the falling price of oil being cited as the main reason. However core inflation, which excludes food and energy prices, rose to 1.4%.

On Wednesday, the latest Bank of England minutes revealed no change in the vote for changing monetary policy, but BoE members were quick to point out that inflation could rise sharply once the effect of lower oil prices had passed. UK unemployment rates fell to 5.7% in December and wage growth continued to accelerate, albeit at a slower pace, by 1.7%. The improving conditions of the UK labour market drove the pound to the highs mentioned above.

The week was rounded off with retail sales increasing to 5.4% in January but marginally missing an expected increase to 5.9%.

Positive data from the Eurozone was overshadowed by the ongoing negotiations between Greece and the Eurogroup. The latest ZEW survey of economic sentiment in the Eurozone showed a sharp increase to 52.7 in February. Consumer confidence rose to -6.7 in February and Markit services PMI in the Eurozone and in Germany increased to 53.9 and 55.5 respectively.

On the Greek front, we saw the ECB marginally increase the size of the ELA funding for Greek banks (from €65bn to €68.3bn) for two weeks and on Friday the Eurozone approved a four-month extension of Greece’s €240 billion bailout. Greece will present a list of reforms to be approved by the country’s creditors in order to secure bailout extension, which will give it more time to reach a lasting agreement with its creditors.

On Wednesday night, the minutes from the January Federal Reserve meeting showed a more dovish stance, with policymakers worried about lower than expected inflation as well as slow wage growth in the US economy. The comments incited speculation that a hike in interest rates in the US could be delayed from an expected mid-2015 until later in the year.

THIS WEEK

Leading on from last week’s minutes from the Fed, Janet Yellen will be testifying on Tuesday on the Semi-annual Monetary Policy Report to the Senate Banking Committee. Markets will be keen to hear the details of her comments to get a better gauge on when the US may start to increase interest rates.

The other key data set to take the headlines this week will be the latest inflation figures from the Eurozone and the US as well as 4th quarter growth figures from the UK and the US.

A full round up of data and events for this week can be found on the right of this report.

Monday 23 February 2015, 10:34am

CURRENCY SNAPSHOT

GBP – Good early employment figures buoy the Pound.
EUR – The ECB Monetary Policy Meeting Accounts should dominate market interest today.
USD – Surprisingly Dovish FOMC Minutes weaken the Dollar.

YESTERDAY

After playing second or third fiddle to Greek and US dramas over the past week, the Pound spent most of yesterday climbing after a batch of positive figures in the morning. Average Earnings came in at 2.1%, exceeding the expected 1.7%. This figure is important as it has been frequently cited by BoE Governor Mark Carney and his colleagues as key to future rate hikes. Claimant Count Change was the next figure in, also beating estimates at -38.6k (-25.2k expected). Some punters were predicting that the MPC Official Bank Rate Votes could swing in the ‘cut’ direction to 0-2-7 however it was unchanged at 0-0-9. The Unemployment Rate rounded things up with a favourable 5.7% (expected 5.8%).

The US, on the other hand, couldn’t take a trick yesterday with every single release inside UK trading hours negative, with the exception of Housing Starts which came out in line with the expected 1.07M. The FOMC minutes last night were surprisingly dovish and have reduced expectations of a Fed rate hike in the near term. Officials have called the current global situation a ‘currency war’ with nations everywhere cutting their rates to stay competitive in the exports market. The news weakened the Dollar and sent Cable briefly to the highest level since January 2 this year.

Overnight the ECB also agreed to raise the Emergency Liquidity Assistance for Greece from €65B to €68.3B and the Euro regained some ground from yesterday’s new low against Sterling

TODAY

Early Eurozone figures this morning were a mixed bag. French CPI and the Euro Current Account figures were negative, however the Swiss Trade Balance far exceeded the expected 1.23B by coming in at 3.43B. This was surprising given the ‘uncapping’ in January which was expected to make Swiss exports less competitive. Next month’s reading will be key to see what a full month will do to the number.

At Midday the ECB Monetary Policy Meeting Accounts will be released. This comes out eight times per year, four weeks after the Minimum Bid Rate and gives details on what factors were taken into account when deciding on the rate. As always, this will be closely scrutinised for hints on ECB member’s outlooks.

In the afternoon the US have their Unemployment Claims and Philly Fed Manufacturing Index and will be looking for positive numbers after their run of poor form so far this week.

Thursday 19 February 2015, 09:47am

CURRENCY SNAPSHOT

USD - FOMC minutes will hopefully provide some guidance on when interest rates are expected to change
GBP - Nothing new is expected from BoE so the pound will be reliant on good unemployment figures
EUR - the euro will follow news from the UK and the U.S. as it has no data due itself

YESTERDAY

Yesterday once again proved a little slow, with the pound reaching new highs the previous evening against the euro. It would be fair to say some more volatility was expected in the market given that the UK’s inflation figure was expected to drop to a low of 0.3% which we haven’t seen since the mid 90’s. The consensus was in fact correct as the figure released was 0.3% for CPI. Initially the market had a knee jerk reaction with the pound dropping around 30 pips before retracing back up to where it was.

The pound was helped by better than expected Core CPI which come out at 1.4%. PPI out of the UK was also better than expected coming out at 0.5% following predictions of 0.4%.

German and European economic sentiment were also released with the European figure at 52.7, above the expectation of 51.3 and the German figure low at 53 versus the expected 55. The pound lost some ground to the euro in the afternoon but remained strong against the euro.

TODAY

Today there's is a few important pieces of data released from the UK and the U.S. All of the UK releases will be at 09:30, average earnings could well be a significant figure expected at 1.7% the same as last time however this figure has improved month on month since September so there may be higher expectations for this than there usually would be.

Claiming count change will also be out for January and the figure is actually expected to drop from -29.7k to -25k. More importantly the headline unemployment rate is out, expected to remain at 5.8%, for the most of 2014 this has been a release the pound has relied on being good but has slowed of late. Unemployment has not increased since 19/02/14 so today's figure coming in at 5.8% or better would mean unemployment has not increased at all on the last 12 months. The BoE minutes are also due, last month two members changed their mind on interest rates from a hike to unchanged. Following Mark Carneys inflation report last week it is hard to envisage any change this time so the market is expecting 9-0-0 in favour of keeping rates unchanged.

Greece is expected to ask for an extension to its loan agreement with the Eurozone for up to 6 months. It remains to be seen whether this is granted or not but the general consensus suggests that it will.

Later today US PPI is out and it is expected to drop to 0.3% from 1.1%. FOMC minutes will follow shortly. In the last month or so there has been a lot of speculation over when the US might hike interest rates with some saying it's over a year away and others saying as soon as June, so hopefully today's announcement will provide some guidance as to when is most likely.

Wednesday 18 February 2015, 09:38am

CURRENCY SNAPSHOT

EUR: Talks between Greece and the Eurogroup collapse as no agreement can be reached.
GBP: Sterling generally weaker across the board ahead of today’s inflation figures.
USD: US dollar makes minimal moves with the US closed for Presidents Day.

LAST WEEK

As the US celebrated Presidents Day, trading became very thin in the absence of any major economic data and no sign of a breakthrough between Greece and Europe’s finance ministers.

Indeed the only data that was released was the Eurozone trade balance, which showed an increase in the surplus from €21.2bn in November to €24.3bn in December.

Talks in Brussels between Eurozone finance ministers and Greece continued to disappoint markets as no agreement could be concluded between the two parties. A Greek government official commented that the Eurogroup discussed “unreasonable”, “unacceptable” draft text that insisted on extending the bailout and that “in these circumstances, there cannot be a deal today”.

Greece’s finance minister Yanis Varoufakis still seems confident a deal can be done predicting an ‘honourable deal’ can be concluded within 48 hours as well as stating he was ready to do “whatever it takes” to reach an agreement

The small gains made by the euro following the trade balance figures were erased as the European trading came to an end and overnight the euro continued to weaken.

THIS WEEK

The Reserve Bank of Australia revealed the minutes from their latest monetary policy meeting overnight commenting that the recent interest rate cut was due to economic growth expected to pick up later than expected and unemployment expected to peak higher that originally forecast.

January’s inflation figures for the UK will come into focus this morning with an expected deflationary reading of 0.8% for the month. The yearly inflation reading is forecasted to fall from 0.5% to 0.3% with core inflation figures expected to remain at 1.3%.

However, according to the Confederation of British Industry (CBI), the fall in inflation (exaggerated by the fall in oil prices) should cheer consumers to push Britain to its fastest growth, 2.7%, since the financial crisis. Indeed data later this week is set to reveal that wage growth should remain at 1.7% for the three months leading into December, providing UK consumers more spending power.

Also this morning, the latest ZEW Survey from the Eurozone and Germany is set to reveal that economic sentiment increased in February to 51.3 and 55 respectively from 45.2 and 48.4 in January.

Europe’s finance ministers will be meeting in Brussels again this morning for a full ECOFIN meeting – so markets will continue to keep an eye on things here for any potential developments.

Tuesday 17 February 2015, 09:20am

CURRENCY SNAPSHOT

GBP - The pound remains strong against the Euro and higher against the dollar as markets await the BoE minutes and jobs figures on Wednesday.
EUR - Greek debt negotiations will remain the focus as the debt deadline nears, keeping the pressure on the Euro.
USD - The USD is on its back foot at the moment following poor retail sales on Friday. Markets await FOMC minutes on Wednesday for further rate rise guidance.

LAST WEEK

The week began fairly flat, with the pound trading in tight ranges across the board. Tuesday saw UK Manufacturing and Industrial production just miss expectations, however the pound held its own. In the US, Fed member Lacker said that in his opinion the Fed should raise interest rates in June and the impact of low oil prices will be short-lived.

The Greek Government won their confidence vote on Tuesday with 162 yes votes, thus allowing them to focus on reaching a resolution with the Troika on their debt repayments. However, the first meeting between Greek and European officials in Brussels regarding the future of Greece’s bailout broke down, as Greek PM Alexis Tsipras reiterated that he is not willing to accept the extension of the bail-out package, regardless of what Germany wants. Further meetings were then scheduled ahead of the 28th February deadline.

The Australian dollar weakened on Thursday morning, as the unemployment rate increased from 6.1% to 6.4%. Later that day the Governor Stevens of the Reserve Bank of Australia spoke and he was expected to provide further forward guidance on the Australian Dollar, but instead simply stated that the weaker Australian Dollar was having the expected impact on the Australian economy.

BoE Governor Carney spoke and released an inflation report for the UK. In the letter sent to Chancellor George Osborne, Carney highlighted that he had upped the growth forecast for the UK in 2016 and that inflation should be in line with the 2% target by the end of 2016 and that interest rates would likely increase near the start of 2016, which sent the ound higher across the board.

The US dollar struggled on Friday afternoon following a poor showing from US retail sales, which came in below expectations and a rise in unemployment claims.

THIS WEEK

The week will start off slowly with the US on Presidents' Day holiday and no top tier economic data scheduled to be released today. Markets will be focussing on the Eurogroup finance minister meeting in Brussels where the main topic is the possible extension or modification of Greece’s bailout programme that expires at the end of the month. This meeting may be the last opportunity to come to an agreement on a bailout programme for Greece, as any deal will also have to be approved by various national parliaments. There is however talk of setting up another extraordinary Eurogroup meeting later this week that will give more time to reach an agreement.

Markets will also look to see if the Russia-Ukraine ceasefire holds today.

Inflation numbers out of the UK will be the focus on Tuesday as CPI is released ahead of the BoE minutes and unemployment rate on Wednesday. UK jobs figures will be eyed closely as the markets look to the wage growth to see if this has continued to strengthen.

In the Eurozone, German ZEW economic sentiment is expected to show a market improvement on Tuesday, up from 48.4 to an expected 55. On Wednesday the ECB will meet at its monthly meeting, but as part of the new schedule this is a non-monetary policy meeting. The week ends with manufacturing PMI's from the Eurozone and Germany, both expected to show a small improvement.

A quiet week of news is expected from the US; FOMC minutes are to be released on Wednesday and manufacturing PMI on Friday. Strong US data has seen Fed members turn more hawkish and as such we could see some forward guidance from the FOMC on a rate hike this year.

Monday 16 February 2015, 10:03am

CURRENCY SNAPSHOT

GBP - Carney’s speech increases expectations that interest rates could increase in the UK at the start of 2016, strengthening Sterling
EUR - Confidence in the Eurozone increased as the ECB provided an additional €5 billion to Greek banks
USD - The US Dollar struggles on the back of poor retail sales and unemployment claims

TODAY

First data announced for the day was from Australia, with employment data being released. The Australian Dollar weakened as the unemployment rate increased from 6.1% to 6.4%, and employment levels were lower than expected.

Bank of England governor Carney spoke and released an inflation report for the UK at 10:30. In the letter sent to Chancellor George Osborne, Carney highlighted that the growth forecast for the UK in 2016 was to increase. Carney also outlined that by the end of 2016 he expected inflation to be in line with 2%, and that interest rates would likely increase near the start of 2016. Sterling strengthened significantly in response to this.

The US Dollar struggled in the afternoon following retail sales coming in below expectations in the US, along with unemployment claims increasing. This further assisted Sterling in its climb against the dollar.

Across the day, an economic summit took place in the Eurozone and the outcome was that Greek banks were to get further an additional €5 billion worth of liquidity from the ECB. This gave the impression the Syriza and the ECB may be working towards a compromise, resulting in the Euro strengthening.

In the evening, Governor Stevens of the Reserve Bank of Australia spoke, and he was expected to provide further forward guidance on the Australian Dollar. However he simply stated that the weaker Australian Dollar was having the expected impact on the Australian economy, and that it could decline further. He did not mention any specific levels, leading to the strengthening of the Australian Dollar.

YESTERDAY

Compared to yesterday, today is expected to be relatively quiet. This morning preliminary GDP data is being released from the Eurozone from a number of countries, with Germany’s coming in above expectations at 0.7%. This could lead to further strengthening of the Euro on the back of yesterday’s news.

This afternoon manufacturing sales are being announced for Canada. It will be interesting to see the data announced, as speculation increased yesterday that Canadian interest rates could be lowered further.

US consumer sentiment is then being released this afternoon, and this is expected to be an improvement on the previous reading. Therefore the US Dollar could begin to regain ground this afternoon.

Friday 13 February 2015, 10:45am

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