Disclaimer: this material is not investment research as defined by the Financial Conduct Authority
USD- All movements will be dominated by the US election.
GBP- Industrial and Manufacturing production results released early this morning.
EUR- Will be affected by external movements from the US election.
Yesterday was quiet on the data front which did little to distract markets from the US elections. Eurozone Retail Sales disappointed and were largely dragged down by poor figures from Germany. However, Investor confidence on the continent did improve slightly.
Overnight, trade balance figures for China improved but were lower than expected. The level of imports and exports were both lower, a further sign that China’s economy is changing in nature. Earlier this morning, Germany’s Industrial Production data missed expectations once again, declining drastically into negative territory.
Movements in the currency markets were volatile yesterday with no clear direction but the pound has improved overnight and through the early morning.
The US election reaching its climax will be the key focus for today and the rest of the week. Movements today will be dominated by exit polls and early results announcements from States.
Current consensus indicates that a Trump victory will considerably weaken the US dollar against the world’s largest economies, however, the greenback could rebound slightly as money flows into safe haven currencies. As a result, other safe haven currencies will be significantly affected. The Swiss National Bank have confirmed they are ready to intervene to prevent the franc strengthening to excess. It is also highly likely that the Mexican peso and Canadian dollar could weaken by up to 20%, due to their exposure to Trump’s policies.
The UK’s Industrial and Manufacturing figures are expected to improve slightly this morning and could add to sterling strength, if this occurs. Inflation report hearings begin shortly afterwards and GDP estimates are released. Any improvement on the previous reading is likely to help the pound.
The Japanese Yen has weakened off and the safe haven is in less demand with Clinton ahead in the majority of polls. If Clinton takes victory, the dollar could gain against sterling and the euro but the overall movement is predicted to be smaller and short lived.
Tuesday 08 November 2016, 09:46am
GBP – The jobs related data out yesterday for the UK came in mixed. This will put the focus for the pound on the Bank of England’s interest rate decision out today.
USD – Crude oil inventories hardly had an effect yesterday, however all eyes will be on data to be released this afternoon in the US, relating to inflation and unemployment.
EUR – Inflation data and trade balance figures are to be released today for the euro area, however this will likely be overshadowed by releases from the UK and US.
Yesterday we saw a mixed bag of employment related data released for the UK. Average earnings was higher than expected, however claimant count came in worse than predicted. The pound continued to lose ground again throughout the day, with the Sterling to euro and US dollar rates hovering around 2 week lows.
French inflation data came out in early hours of trading, and were in line with expectation and hence had a minimal effect on the value of the euro.
Crude oil inventories were released in the afternoon for the US, which although it is not directly related to the US economy, it does often move the dollar as it is the currency that oil is traded in.
Today is a very important day for the UK, being the so-called ‘Super Thursday’. The Bank of England release their official interest rate decision at midday. Members are expected to vote in one fashion, all being for keeping interest rates the same, but the statement given afterwards by Mark Carney could give the market an indication of what lies ahead for the BoE.
We also have retail sales out in the morning, but unless this is drastically out of line with what the market expects, it may not cause any big movements.
The US also have some key information to be released in the afternoon with Retail sales, Phili Fed Manufacturing index, Unemployment data and PPI data coming out. With the Fed’s interest rate statement out next week, all eyes may be on these figures to possibly gauge the US’s current economic conditions.
The Fed’s focus has been mainly on jobs data with relation to interest rate changes, so the unemployment rate figure could be key to their decision next week.
In early hours of the morning the Swiss National Bank decided to keep their interest rates at -0.75%, which was as the market predicted and hence caused no real movements in the Swiss Franc.
Thursday 15 September 2016, 10:12am
EUR - With growth rates tumbling, inflation barely positive and the Italian banking system in crisis, the euro could have a troubled week.
GBP - The pound will look for support from a decent GDP result this week, but could stumble on consumer confidence.
USD – Focus will be on the Fed this week, as markets look to see if the US is still inline for another interest rate hike.
The UK saw inflation and unemployment improve at the start of the week helping the pound rebound higher against the euro and US dollar on Wednesday, however poor retail sales and manufacturing and services figures for July disappointed and caused a sharp fall on Friday, erasing earlier gains.
In the Eurozone, the European Central Bank’s kept its interest rate on hold and in the monetary policy statement, ECB President Mario Draghi indicated that rates will remain at the current levels or lower until March 2017 and the asset purchasing programme was also confirmed to be extended beyond March 2017.
A light calendar for economic data releases from the UK this week is likely to mean markets turn to geopolitical news for direction, with anything Brexit related being watched closely. UK GDP will be released on Wednesday with a slight improvement expected which could bolster the pound. However, consumer confidence on Friday is expected to fall sharply and as a result pressure the pound at the end of the week.
With the major releases of the week scheduled for Friday, it'll be a busy day for the euro. GDP for the Eurozone is expected to have halved from the first to second quarter this year and inflation is expected to remain barely positive. In addition European banks will undergo a health check which is likely to highlight the extent of the troubles in the Italian banking system, as analyst believe that banks could have €360bn in near worthless debt.
Consumer confidence will be the first release from across the pond on Tuesday, with expectations for a fall, which could see the dollar lose some momentum. However this may be short lived as durable goods orders are likely to show a small improvement on Wednesday ahead of the Fed rate decision. Whilst no change is expected from the Fed, attention will be paid to any forward guidance for possible rate hikes this year. GDP and inflation data will close out the week, with a strong performance expected here the dollar is likely to strengthen.
Monday 25 July 2016, 09:49am
Head Of FX & Dealing
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