Weekly Currency Market Analysis
Welcome to the Weekly Market Analysis - our digestible currency market update which gives you an expert insight into key movements, and what to expect in the coming week.
Sterling came under pressure last week as signs that the UK’s economic recovery is cooling increased speculation the Bank of England will wait longer before hiking interest rates. The pound dipped to a 14-month low against the dollar, with GBP/USD touching on 1.58. EUR/GBP was stuck in its recent range of between 0.78 and 0.79 despite recent stress on the euro. UK service sector output slipped to its lowest in 17 months, while the Bank of England held rates at their record low of 0.5 per cent. Sterling was up about two cents on the Australian dollar having at one stage risen by five cents. GBP/JPY was up again to trade at a six-year peak after soaring on the Bank of Japan’s easing measures the week before.
This week, the main economic report will be on Wednesday with UK unemployment and wage data. The Bank of England inflation report that day will also be closely watched. But the most eagerly anticipated event is when bank governor Mark Carney speaks, with investors likely to be paying close attention to what’s likely to be another cautious assessment of the state of the UK recovery.
The dollar took a breather later in the week after US non-farm payrolls missed their mark, but the Greenback remained supported near multi-year highs against its major peers. The dollar index, which measures the Buck against a basket of currencies, reached its highest in four and a half years. USD/JPY ramped up to a fresh seven-year high above the 115 level, before easing back on Friday, after the Department of Labor said US employers added 214,000 jobs last month. The dollar rose to a two-year peak against the euro as the single currency came under broad selling pressure following Thursday’s European Central Bank meeting. USD/CAD fell as a Canadian employment figures beat expectations.
A quiet start to the week may be ahead with Tuesday’s public holiday in the US, but all eyes will then be on retail sales and unemployment figures. The University of Michigan’s consumer sentiment report is always good fodder for USD pairs.
The euro fell sharply last week after the ECB chief Mario Draghi said he had unanimous support to expand the bank’s stimulus programme further. The euro slumped to a two-year low against the dollar after the central banker said the ECB is ready to pour an extra €1 trillion into the ailing eurozone economy. The purchase of government bonds was at last laid on the table. There was little real movement against the pound as sterling came under pressure. EUR/JPY rose as the yen came under yet more fire after the BoJ’s decision the previous week to expand its already radical stimulus package.
Data is thin on the ground this week as markets continue to settle down after the ECB’s move last week. But preliminary eurozone GDP data and fina inflation figures will be watched by investors with interest.
The Russian rouble crashed to a record low last week as fears about the economy stoked a ten per cent slump in the currency over 48 hours. Reports that a Russian tank column had entered eastern Ukraine further worried markets, but bets the Russian central bank will step in to halt the decline in the rouble stemmed losses.