FX Market Recap

Last week we saw the euro struggle against what can only be considered a very strong run by the pound. GBP then, in its own right, seem to do quite well versus a formidable dollar. We saw UK CPI come in as expected at -0.1, but public sector borrowing was also seen to increase by £1.1Billion last month – the worst October increase in 6 years. Retail sales were slightly disappointing with a month-on-month drop seen of -0.6%, whilst, on the whole, GBP ended the week just below 1.4300 against EUR and 1.5200 against USD.

This week will be notably quieter for the UK as the only data worth paying attention to is probably the quarterly GDP estimate we’ll see at the end of the week. This should act as a wider indicator of economic growth. Other than that, we’ll look to what’s happening elsewhere for any possible impact on the pound.

EUR saw a poor week of performance last week, with losses seen against most of its major competitors. CPI for Europe was seen to rise to 0.1% from a flat zero, and Germany’s ZEW sentiment was seen to increase to 10.4 – although this didn’t have much of an impact on EUR strength. There were also a few hints dropped by Mario Draghi that QE may be in place (or, even ramped up), but we did see the single currency end the week down against the dollar at an almost 7 month low.

This week will be data-rich for the Eurozone as we see French and German manufacturing PMI numbers today out today, while from Germany tomorrow we see IFO business climate data. Added to that will be speculation over whether or not Draghi’s hints come to fruition about extending QE which already stands at €60Bn a month by way of bond buying.

Across the pond last week, USD maintained its strength as pundits are increasingly speculative that an interest rate rise will happen in next month. CPI data showed that inflation rates increased 0.2%, while unemployment claims came down as well by 5K. We also saw 5 Fed members stating that a rate rise is coming soon off the back of improved economic performance.

This week brings with it an unexpected Fed announcement tomorrow which, at the moment, doesn’t have a published agenda. Could it be the big interest rate announcement the world has been waiting for? We will also see quarterly GDP data, consumer confidence data, unemployment and goods orders data as the week progresses.