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Darren Kilner

Darren Kilner

Head Of FX & Dealing

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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 - Talks resume between Greece and its creditors over its reforms this afternoon
GBP - Carney warns households that the next move for the BoE would be a rate hike.
USD - Yellen reiterates message that rate hikes could be delayed.

LAST WEEK

The pound generally underperformed last week, falling by 0.6% against the US dollar and by 1.06% against the euro. Inflation fell to a record low of 0% adding to concerns that interest rates may need to stay lower for longer. Whilst some members of the BoE have said that given the inflation outlook there is scope for the Bank to cut rates, Mark Carney on Friday came out and stated that that next move will be for rate hike. Retail sales in the UK rose higher than expected for the month of February, up by 5.7%, on account on the recovery in the housing market, thus boosting purchases of products such as furniture.

Positive data from Germany, largely supported the euro last week, with Gfk consumer confidence rising to 10, IFO business climate rising to 107.90 and import price index rising to 1.4%. The euro outperformed the US dollar for the second consecutive week, up by 3.67% since making the recent low.

Out of the US, inflation was also at 0% (but up from -0.1% previously), Markit manufacturing PMI rose to 55.3, but durable goods fell by 1.4% and finalized fourth quarter GDP came in at 2.2% growth, a substantial fall from 5% growth in the third quarter. Following the growth data, Janet Yellen in a speech on Friday night said a rate hike may be warranted later this year, but added that weakening inflation pressures could cause the Fed to delay – a similar message from their policy statement on March 18th.

THIS WEEK

A fairly quiet week on the data front with Eurozone confidence the only real news out on Monday. Tuesday brings about German unemployment data, UK GDP, US Consumer confidence and Eurozone inflation, which will be watched closely for any further deflationary pressures.

Manufacturing PMI’s for the Eurozone, UK and US will dominate Wednesday’s news ahead of the last day of the working week on Thursday, when the ECB release its meeting accounts. There is likely to be some positioning ahead of the long Easter break on Thursday.

Monday 30 March 2015, 10:08am

CURRENCY SNAPSHOT

GBP – Strong retail sales give Sterling a boost EUR – Greece falls out of the spotlight in the short term USD – Dollar remains strong following unemployment data yesterday

YESTERDAY

Sterling strengthened yesterday, particularly against the Euro following the release of the UK’s month on month retail sales figures. These came in stronger than expected at 0.7%. However, the Dollar then hit back with its own unemployment claim figures, which came in stronger than expected.

The Bank of Canada Governor Poloz spoke yesterday afternoon in London. He identified that the negative effects of lower oil prices were beginning to impact the Canadian economy, however lower interest rates would have a positive impact in the long term. One of the Swiss National Bank’s governing board, Fritz Zurbrugg, also spoke yesterday evening concerning Switzerland’s economy. He mentioned that there were difficult times ahead for the Swiss economy as inflation is expected to fall well within the negative territory.

TODAY

There is a relatively quiet end to a quiet week today, with very little of significance taking place. German import prices came in higher than expected this morning slightly weakening the Euro. Mark Carney is speaking this morning, so the markets will look for forward guidance.

At 12:30pm, the final quarterly figure for US GDP will be released. Following yesterday’s unemployment data, it would not be surprising for the figure to shake the markets slightly.

The week closes with Federal Chairman Yellen speaking this evening. Having discarded the “patient” terminology, analysts will continue to look for when interest rates are likely to rise in the US.

Friday 27 March 2015, 10:20am

CURRENCY SNAPSHOT

EUR: Consumer confidence rises to a 13 year high in Germany
GBP: Low inflation could be here to stay, undermining thoughts of a rate hike.
USD: Data suggests that the US may not quite be ready to raise rates anytime soon.

YESTERDAY

Data yesterday was very minimal with the only things to note being the German IFO business climate figures coming in better than expected at 107.9 versus the expected 107.3 and durable goods in the US disappointing, falling by 1.4% for the month of February.

Away from the data, Greece received some good news with the European Central Bank agreeing to raise the emergency liquidity on offer to Greek banks, to €71bn. Whilst this is good news as the banks shouldn’t run out of funds, it does suggest concerns as savers may well be withdrawing funds.

Turning to the UK, Bank of England policymaker Kristin Forbes commented in the Evening Standard that UK inflation will probably fall into negative territory, potentially giving scope for the BoE to cut interest rates should inflation stay persistently low.

TODAY

Whilst confidence in Greece seems to be sapping, data this morning has shown that German consumer confidence has risen to a 13 year high.

UK retail sales figures are due for release at 9.30am and markets will be keen to see if recent wage growth has filtered through to the spending power of the UK population.

ECB President Mario Draghi is set to be questioned by Italian MP’s in the afternoon about a range of issues in the Eurozone and the day will finish with US initial jobless claims and service sector figures for the month of March

Thursday 26 March 2015, 09:42am

CURRENCY SNAPSHOT

EUR: Positive inflation data yesterday gives the Euro a boost.
GBP: The Pound shrugs off weak inflation data to finish the day around same levels as the open.
USD: Durable Goods out today as the Dollar slowly loses ground.

YESTERDAY

Yesterday was a little quieter than expected despite the quantity of data. Eurozone PMI figures in the morning exceeded expectations, impressing the market causing the Euro to rise to a one month high against Sterling at Midday. This was assisted by poor inflation data out of the UK, the most important of which being the CPI y/y figure which fell to 0.0% for the first time in fifty years. Market commentators, however, deny that it’s all doom and gloom saying that it is ‘good disinflation/deflation’ being spurred by wage growth and falling prices on products such as oil.

American inflation data was less surprising coming in at 0.2% as expected, however the market punished the Dollar briefly before bouncing back and GBPUSD has been trading in a tight range since

TODAY

Another quiet one is on the cards today with the only data releases of note being the German Ifo Business Climate in the morning and US Durable Goods in the afternoon.

FOMC Member Evans will also speak in London in the morning and it will be interesting to see if he echoes fellow member James Bullard who mentioned yesterday that there is still disparity between when the Fed plans to rate the interest rate and when the market perceives that it will occur

Wednesday 25 March 2015, 10:39am

CURRENCY SNAPSHOT

EUR: Angela Merkel and Alexis Tsipras set to meet amid concerns over liquidity
GBP: Sterling strength causes fears over inflation remaining lower for longer
USD: Dollar suffers biggest weekly fall in three and a half years

YESTERDAY

The US dollar was in prime focus last week following a less than expected hawkish statement from the Federal Reserve. Bets on a hike in interest rates have been pushed back from June to September/October as the Fed downgraded its forecasts for growth and inflation. The US dollar index ended the week down 2.53%, its biggest loss since October 2011.

The Bank of England warned Wednesday that sterling’s recent gains could keep inflation below target, which would warrant keeping interest rates on hold for longer.

The minutes of the BoE’s March meeting showed that official were concerned that sterling’s recent gains could continue, due in part to the European Central Bank launching its trillion-euro quantitative easing program.

Tensions between Greece and the Eurogroup continued as both parties agreed that the original terms from the 20th February would remain but Greece would need to speed up its delivery of its reform package in order to receive further bailout funds. However the euro regained ground from the previous week as inflation for the month of February improved from 0.6% to 0.7%.

Data elsewhere showed fourth quarter GDP increased more than expected by 3.5% and inflation in Canada remained at 1% for February.

TODAY

Greece and the Eurozone will be in focus today as German Chancellor, Angela Merkel and Greek Prime Minister, Alexis Tsipras will be meeting in Berlin this afternoon amid mounting concern that Greece may not be able to make imminent debt repayments.

Mario Draghi will be testifying to the European Parliament’s economic and monetary policy affairs committee this afternoon, with an expected positive tone about economic prospects, given the recent implementation of QE and data suggesting signs of recovery in the Eurozone.

In the week ahead, investors will be focusing on Tuesday’s US inflation report after Fed Chair Janet Yellen warned last week that the stronger dollar was pushing down inflation.

Survey data on Eurozone private sector activity, due for release on Tuesday, will also be closely watched.

Monday 23 March 2015, 10:14am

CURRENCY SNAPSHOT

EUR: Angela Merkel and Alexis Tsipras set to meet amid concerns over liquidity
GBP: Sterling strength causes fears over inflation remaining lower for longer
USD: Dollar suffers biggest weekly fall in three and a half years

LAST WEEK

The US dollar was in prime focus last week following a less than expected hawkish statement from the Federal Reserve. Bets on a hike in interest rates have been pushed back from June to September/October as the Fed downgraded its forecasts for growth and inflation. The US dollar index ended the week down 2.53%, its biggest loss since October 2011.

The Bank of England warned Wednesday that sterling’s recent gains could keep inflation below target, which would warrant keeping interest rates on hold for longer.

The minutes of the BoE’s March meeting showed that official were concerned that sterling’s recent gains could continue, due in part to the European Central Bank launching its trillion-euro quantitative easing program.

Tensions between Greece and the Eurogroup continued as both parties agreed that the original terms from the 20th February would remain but Greece would need to speed up its delivery of its reform package in order to receive further bailout funds. However the euro regained ground from the previous week as inflation for the month of February improved from 0.6% to 0.7%.

Data elsewhere showed fourth quarter GDP increased more than expected by 3.5% and inflation in Canada remained at 1% for February.

THIS WEEK

Greece and the Eurozone will be in focus today as German Chancellor, Angela Merkel and Greek Prime Minister, Alexis Tsipras will be meeting in Berlin this afternoon amid mounting concern that Greece may not be able to make imminent debt repayments.

Mario Draghi will be testifying to the European Parliament’s economic and monetary policy affairs committee this afternoon, with an expected positive tone about economic prospects, given the recent implementation of QE and data suggesting signs of recovery in the Eurozone.

In the week ahead, investors will be focusing on Tuesday’s US inflation report after Fed Chair Janet Yellen warned last week that the stronger dollar was pushing down inflation.

Survey data on Eurozone private sector activity, due for release on Tuesday, will also be closely watched.

Monday 23 March 2015, 09:51am

CURRENCY SNAPSHOT

EUR: Greece urged to speed up its delivery of its reforms to receive bailout funds.
GBP: Sterling continues to fall ahead of public sector borrowing data this morning.
USD: The dollar gets back on the front foot as markets continue to focus on rate hike potential this year.

YESTERDAY

Despite market projections being pushed back to September/October for the Federal Reserve to raise interest rates, the US dollar managed to claw backs its losses from Wednesday night to finish the day stronger across the board. It looks like market came to its senses as the main takeaway from the statement was that a rate hike is still on the cards this year, albeit slower and later.

On the data front initial jobless claims beat expectations with only 291,000 filing for claims last week and the US current account falling further to –US$113.5bn.

The euro weakened slightly yesterday ahead of a summit in Brussels yesterday evening to discuss Greece’s financial problem. The fallout from the meeting was nothing new, with Greece promising to speed up the implementation of its bailout agreement and will send a full list of its reforms to the Eurogroup.

Fears of liquidity in Greece are rising with the country due to repay €350m to the IMF today.

Interestingly, the Bank of England’s chief economist Alex Haldane, commented that the chances of a rate cut by the BoE are as likely as there is to be rate hike by the central bank. Haldane argues that Britain faces significant deflationary pressures based on the relative strength of the pound and spare capacity in the labour market which may be responsible for poor wage growth – earlier this week wage growth fell short of expectations only rising by 1.8%.

TODAY

The UK’s public sector borrowing is set to show a deficit of £7.7bn in February from a surplus of £9.405bn in January, which could weigh on the pound early on. In the afternoon, Canada will be in focus with the release of February’s inflation figures, expected to increase by 0.7% and retail sales dropping by 0.7% in January

Friday 20 March 2015, 10:34am

CURRENCY SNAPSHOT

The day started yesterday with the pound dropping off a little bit against both the euro and dollar probably in anticipation of the upcoming budget release. Before that, the BoE minutes were released and as expected remained at 0-0-9 thus keeping interest rates unchanged. The unemployment rate also came out for the UK which remained at 5.7%, but this had a fairly muted reaction.

THE BUDGET 2015

George Osborne took the helm following Prime minister’s questions. On the whole this had little impact on the pound as much of the announcement was already priced in or expected, it was clearly more a budget to win political votes rather than to affect financial markets. The highlights:

• The deficit is expected to fall by more than £7bn next year and by 2020 the deficit to be positive
• The unemployment rate is expected to fall to 5.3% by the end of the year
• Inflation projected to fall to 0.2% in 2015
• Tax on "diverted profits" aimed at multinational firms moving profits "artificially offshore"
• Annual bank levy rise to 0.21% raising an extra £900m

Yesterday President Draghi also drove home the message that further fiscal consolidation is essential. He highlighted that a "sustained recovery is taking hold" but again this had little effect.

Later in the evening was the FOMC interest rate decision, which remained at 0.25% along with a statement and a press conference.

The Fed said it would wait for US labour market conditions to improve before raising rates.The Fed, as expected, removed its patient language but the dollar fell massively mostly due to the downgrading of its growth projections, so the dollar lost over 3.5% against the pound and euro.

TODAY

Today will be a little quieter, the market will mull over the Fed announcements last night. The reaction in the early hours has been positive and the dollar has already clawed back over a percent from what it lost last night.

The main thing out today is the current account balance from the U.S. expected at -104.3bln. Initial jobless claims are also out expected to increase to 292k.

Thursday 19 March 2015, 10:00am

CURRENCY SNAPSHOT

EUR – Euro begins to regain form as markets become more focused on the US and UK
GBP – What is expected to be a very political budget has weakened Sterling
USD – Markets look for forward guidance on when the Fed will increase interest rates

YESTERDAY

The day opened up with monetary policy meeting minutes being released from Australia which had minimal impact, as the rhetoric was very similar to what we have previously heard. This was followed by a press conference with the Bank of Japan. The global issue of deflation was reiterated, as the Bank of Japan forecast the possibility of Japan returning to deflation this year.

We then had German ZEW economic sentiment released at 10am. This came in below expectations, however the reading was stronger than previous. This therefore in fact contributed to the Euro strengthening. The year on year CPI for the Eurozone was released as well, and this came in line with expectations at -0.3%.

In the afternoon, manufacturing sales came out in Canada, and they were significantly weaker than the forecast 1.6% at -1.7% weakening the Canadian Dollar. US building permits were also released slightly better than expected. The last piece of significant data for the day was the global dairy trade index, which was worse than previous, weakening the New Zealand Dollar.

TODAY

At 9:30am some decisive data is being released from the UK. This includes average earnings, claimant count changes and MPC official bank rate votes. You can expected Sterling to move following this depending on what data is released.

We have wholesale sales being released from Canada at 12:30, however all eyes will be on the UK as George Osborne releases the budget. The market is expecting the budget to be one of the most political in recent history, so it would not entirely be surprising if Sterling lost ground.

This evening, markets will be then be turning to the US. There will be a rate statement and the Fed will be releasing its economic projections. It will be interesting to see what forward guidance is given, and to what extent a June rise in interest rates is realistic.

Wednesday 18 March 2015, 09:51am

CURRENCY SNAPSHOT

EUR – The Euro has a good day as the Dollar falters
USD – Negative US data sees EUR/USD fall
GBP – The Pound falls in early trading

YESTERDAY

The market used yesterday to catch its breath after the excitement of last week with the Pound trading in tight ranges against the other majors.

Dollar data was entirely negative, the most important result being the monthly Industrial Production figure which fell short of the expected 0.3% at 0.1% and Cable closed slightly higher than the open.

In the afternoon ECB President Draghi spoke at the SZ Finance Day in Frankfurt, the key takeaway being that the ECB will be striving to use this time of economic instability to implement reforms to the European institution.

TODAY

Sterling fell sharply against its counterparts in early trading, likely in response to facts coming out concerning the UK budget which is due for release tomorrow.

The first technical data of note today is the German ZEW Economic Sentiment which is expected to rise to 58.9 from 53.0 last month, however technical data in the Eurozone will have minimal impact while the larger issues continue to play out.

In the afternoon the Canadian’s monthly Manufacturing Sales are expected to drop to -1.1% from last month’s 1.7%. US Building Permits come out at the same time and are expected to increase marginally. The final release of note will be the Global Dairy Trade Price Index from New Zealand.

Tuesday 17 March 2015, 09:48am

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