Tag Archives: foreignexchange

The quiet start to the week continues with little major economic releases scheduled for today.

Markets continue to focus on the upcoming UK and French elections. There is a lot of market talk that the upcoming elections may not be positive for GBP. One major bank has said that GBP remains beholden to exchange rates and will likely be on a path of gradual weakness in the upcoming months.

Current poll results are largely in Labours favour; therefore, the market is already positioned for such a result and could be what is putting the holding back the pound strengthening further.

Focus will shift to Wednesday afternoon with the US releasing their New Home Sales report, it has been forecasted to come in at 640k up from last month’s 634k.

Thursday brings the release of US Employment figures, with markets pricing in a small decline to 236k (from 238k). Gross Domestic Product will be announced in cohesion with this, with investors eyeing a major decline to 1.3 percent from last quarters 3.4 percent.

For the UK, attention turns to Friday for Gross Domestic Product, it is widely expected that there will be signs of growth in the UK with markets anticipating a rise to 0.6 percent, up from last quarters -0.3 percent.

With the lack of UK data being released this week we could see the pound fall further from its 22-month highs we saw last week.

On the currency front, the pound could fall further against dollar due to the lack of major releases in the UK.

This morning, we have the German IFO business and UK CBI Industrial Trends survey due.

It is a very quiet start to the week in terms of economic data, with focus shifting to tomorrows UK growth figures and Thursdays raft of US data.

The pound has fallen from its highs where it hit a 22-month high against the euro on June 14^th but has since slowly faded away.

As it is a quiet week, we could see the pound drift lower towards the end of the week.

A return to the mid-month highs looks unlikely, as last week’s Bank of England policy update revealed that the bank is readying for an August rate cut.

Markets are now pricing in a 65 percent probability of this happening adding pressure to the pound. Obviously, as this percentage increases the pound could lose further value.

The euro has its own problems with the French election taking centre stage. Political events will remain an important driver of the euro ahead of the French general election on 30^th June and 7^th July.

As we edge close to the event itself, focus will certainly be on the polls ahead of the election as investors try to position for different potential outcomes.  

Already released this morning, Pound Sterling has been boosted by strong retail sales figures. The above consensus retail sales reading showed the total value of sales by retailers in the UK rose by 2.9 percent in May (forecasted 1.5 percent).

Retail sales jumped 1.3 percent year-on-year in May, showing a significant rise from the -0.9 percent figure markets expected.

The ONS said retail sales improved in all sectors – supported by the two bank holidays in May and the hotter weather enticing UK consumers to spend.

Yesterday, Pound Sterling marginally dropped against the Euro and Dollar following the Bank of England monetary policy decision. Inflation has returned to the Bank’s target of 2 percent. However, ‘Andrew Bailey’ Governor of the Bank of England highlighted for inflation to remain low, the interest rate level needs to remain at 5.25 percent.

The Monetary Policy committee voted by majority of 7-2 to keep rates unchanged at 5.25%. Markets are now anticipating a 25-basis point rate cut in August, although the retail sales release earlier this morning will show signs of support for the UK economy. 

A busy day ahead as markets eagerly await the Bank of England policy announcement.

The announcement takes place this afternoon at midday, where it is very much expected that the Bank will leave interest rates at 5.25 percent.

Markets are pricing in about a 30 percent chance of an August rate cut, meaning there is scope for some movement in GBP today.

The key focus will be on the comments that follow today’s rate announcement and how MPC members vote.

The potential movement will come from how the members will vote and the majority that want rates to be cut.

Later this afternoon, we have the US employment figures and EU consumer confidence figures.

To finalise a very busy week, tomorrow we have the UK retail sales figures and EU PMI.

In the afternoon we have the US existing home sales numbers. 

Early this morning the UK released the Consumer Price Index report. As expected, inflation has fallen to the 2 percent target set out by the Bank of England.

Markets have reacted positively to this release with the pound gaining ground against both the euro and the dollar.

There is no more economic data of relevance today, so focus will shift to Thursday. The Bank of England will release their Interest rate announcement which is expected to come in unchanged at 5.25 percent.

Investors will be keen to tune into the meeting minutes to see how the Bank of England view this morning’s inflation release.

Following this, Employment figures in the US will be announced, forecasts are projecting a drop in Unemployment Claims week on week to 235k (from 242k).

Towards the back end of the week, we have the UK retail sales whereby markets are predicting strong growth jumping to 1.5 percent (from -2.3 percent).

Purchase Manager Index will also be released on Friday morning, with strong figures being forecasted for the Eurozone.

On the currency front, the pound has continued to hold its highs against the euro, with the pound also showing strength against the dollar.