UK – Although the pound is performing very well this last
week, there does seem to be resistance from other currencies against the pound,
which is limiting its gains. Manufacturing Data on Tuesday gave Sterling a
boost, but the question is how long can it stay in the spotlight with limited
data in the next week to support it? UK data throughout the week will start off
with CPI y/y figures on Tuesday,
followed by the Claimant Count Change and Unemployment rate on Wednesday. The house view is that Cable
will most-likely retreat from its relatively high levels, as the dollar
continues to slowly but surely gain strength as the Federal Reserve winds down
the QE programme.
Eurozone – The ECB monthly bulletin made it clear that there
was not a change in the Minimum Bid Rate at the beginning of this month because
“the moderate recovery of the euro area economy is proceeding in line with the
Governing Council’s previous assessment”. However, the bulletin reiterated
Draghi’s points from his press conference earlier this month that the ECB
stands prepared to act swiftly with monetary accommodation and lower interest
rates if required. This has helped to strengthen the Euro at the end of the
week. In the next week, the only major event directly affecting the Euro will
be German ZEW Economic Sentiment on Tuesday.
The Euro ended the week on a high note, as the monthly bulletin last Thursday,
combined with positive sentiment toward the Eurozone as the result of a
highly-successful Greek bond sale, allowed it to gain strength near the end of
the week. However, President Draghi blamed the strength of the Euro for the low
rate of inflation in the Eurozone over the weekend, and made the statement that
the “further strengthening of the Euro requires further monetary stimulus”,
signalling that unconventional monetary policy may not be far away.
USA – FOMC meeting minutes which were released on Wednesday
evening of this last week confirmed that there was discussion about the central
bank’s collective concern over the low rate of inflation. The concern was not
enough to warrant a clearer timeline of when we can expect the next interest
rate rise, but the market has interpreted it as a sign that interest rates will
stay low for longer, undermining the USD at week’s end. During this next week
before the Easter holiday, the data to watch for which will affect the dollar
will be Core Retail Sales m/m and Retail Sales m/m on Monday, Core CPI m/m and Janet Yellen speaking at a Federal Reserve
conference in Atlanta on Tuesday,
Building Permits data and Janet Yellen speaking again at the Economic Club of
New York on Wednesday, and finally,
Unemployment Claims and the Philly Fed Manufacturing Index data on Thursday. Cable does seem to be at the
top of the range, and barring any big surprises in the market, we should see
the dollar able to pare back some of the losses it sustained last week against
other currency majors.
End of week forecast:
GBP / EUR
|
1.2100
|
GBP / USD
|
1.6650
|
EUR / USD
|
1.3750
|
GBP / AUD
|
1.7750
|
Nicholas Ebisch
Corporate Account Manager
Caxton FX
