GBP – In the UK, The last week brought relatively good news
for the pound. The Bank of England meeting minutes revealed a positive revised
growth estimate for the UK on Wednesday, and Retail Sales m/m figures on Friday
beat estimates with at least a small sign of growth. The pound has held up
against most other currencies and has the momentum to push higher next week.
Data to watch for this week from the UK will be the Prelim GDP q/q on Tuesday,
Manufacturing PMI on Thursday, and Construction PMI on Friday.
EUR – In the Eurozone, Manufacturing data from last week and
an improved PMI figure confirmed that business activity has increased overall.
However, with inflation at such low levels, the Eurozone is increasingly
concerned with a stronger Euro, which would further destabilize growth. Data is
limited this week, but with a CPI Flash Estimate y/y figure on Wednesday, there
will be a more complete picture of how prices have increased when compared to
economic growth in the region.
USD – Last week, the Dollar provided some resistance to the
advancing pound and Euro with positive durable goods orders last Thursday, but
much will depend on the preliminary US GDP figure this coming week. This week, the
all-important day will be Wednesday, as markets prepare to digest the ADP
Non-Farm Employment Change, Advance GDP q/q data on Wednesday out of the US,
and the FOMC will make a statement at 7pm GMT. The FOMC is also scheduled to
reduce its bond buying by another $10 billion down to $45 billion this week,
and with a relatively stable market, it will be easy for the Fed to proceed
with this. Also, let’s not forget Thursday, as Janet Yellen will be speaking at
a policy summit meeting in Washington D.C.
Canada – Canadian data will also be heavy this week, as the
loonie has proved that it has had some forward momentum with positive Core
Retail Sales m/m last week. BOC Governor Poloz is speaking this week on Tuesday
and Wednesday will bring Canadian GDP m/m figures. The Bank of Canada has been
under increasing pressure to lower their benchmark interest rate of 1% since
growth has been slower than expected in the past year and the Canadian Dollar
has been sliding as a result.
Australia – Last week, the Australian Dollar was weakened
significantly when Australian CPI q/q and the HSBC Flash Manufacturing PMI both
came in negatively and undermined the AUD. This week, we could see a similar
phenomenon, as there will be CNY Manufacturing PMI on Thursday, expected to
improve marginally from a month ago. Also, there will be Australian PPI q/q
expected to improve from the last quarter. The Australian dollar has been
strengthening from its 2013 devaluation slide, but it seems to have stalled
with poor Australian and Chinese data. This week will be an additional focal
point to determine the direction of this rate.
End of week forecast
GBP/EUR – 1.2200
GBP/USD – 1.6900
EUR/USD – 1.3930
GBP/AUD – 1.8200
Nicholas Ebisch
Corporate Account Manager
Caxton FX
