Potentially a positive week for the Pound [Video]

Today's Highlights

• Sterling still strong

• Airstrikes haven't moved US Dollar

• Big week for economic data - currency volatility ahead?

 

Current Market Overview

Well, I hope you had some of that spring weather over the weekend. It wasn’t quite tropical in the UK, but it did feel like a welcome relief from the persistent rain. And if we feel good, I kind of feel the England Women’s netball team must feel like that multiplied by a hundred. A last minute goal clinched the gold medal against Australia by a single point and we have never won that title at the Commonwealth Games before. A fantastic game and an awesome result.

Potentially a positive week for the Pound

I don’t think the medals table had anything to do with Sterling’s strength over the last week, but the Pound is stronger nonetheless. Its mettle will be tested this week as we get a barrage of UK consumer-centric data and the ongoing stories we all know about.  There isn’t a lot to talk about today but we’ll get earnings and employment data tomorrow, inflation on Wednesday and retail sales on Thursday. In general, the forecasts are quite positive. The unemployment rate doesn’t have much more room to improve, but a step up in retail sales is likely (wellies and raincoats being bought, I would guess) and it is likely inflation will stay around the 2.7% level; above target but not too troubling to the Bank of England (BoE). If all is as expected, the Pound should maintain its current levels at $1.42 and €1.15.

Markets seem calmer in response to political pressures

The very precise nature of the strikes in Syria and the measured speeches from the US and French Presidents and the UK Prime Minister seem to have toned down market reaction to the events. Any escalation by Russia might change that but, aside from Putin baring his chest and thumping it, there hasn’t been a response as yet.

US Dollar weak

The US Dollar, which tends to strengthen at times of heighted geo-political tension, has actually weakened against the Pound and Euro. So the markets are not behaving entirely rationally. We shall see if that changes as and when the Russians start shutting down computer systems and gas pipelines. There are also a few US data events this week.  We will see US retail sales, the manufacturing and industrial production statistics and the publication of the Beige Book; a view of the US economy as seen by the regional Federal Reserve offices.

Chinese data could have an impact on commodity currencies

What may also affect the USD and Asian and Australasian currencies will be the Chinese Gross Domestic Product (GDP) data. This is forecast to be very poor in comparison with previous months and that ought to weaken local currencies and those of China’s suppliers, like Australia and New Zealand, as well as commodity producers like Canada and South Africa.

Big news for Canadian Dollar this week

And speaking of Canada, Friday will see the release of what are expected to be positive retail sales and inflation data from Canada. We will also get an interest rate decision from the Bank of Canada. No change is expected, but the tone of their statement may have an impact.

The undead: more than a Romanian legend

And I love the story of Romanian, Constantin Reliu, who returned home after 20 years working abroad to find his wife had registered him as dead. That is bad enough, but the 63 year old approached the court to have himself reinstated as ‘alive’, only to have his claim rejected. Apparently, his claim is too late. So, he is in fact one of the living dead. That must be a nightmare, but it is also strangely cool, too.