GBP: A lot in the sterling price
EUR: PMIs strong so far
USD: Taper talk and action remains a long way off
It’s a quiet data week for sterling coming up and we have to hope that strong data from the UK released last week – inflation, jobs and PMI sentiment figures – are not forgotten about.
As we noted last week, it is all well and good seeing strong data from the economy but should the Bank of England remain quiet and sit on their hands then the rally in sterling will run out of steam. That is not to say that weakness elsewhere – particularly in the USD – may not drag sterling higher, but the pound could become increasingly reliant on poor performance in its competitors for its gains.
The euro reacted well to a speech by ECB President Christine Lagarde on Friday in which she tempered concerns that the European Central Bank would be raising interest rates anytime soon.
Friday’s PMIs were ok, but only ok and the reasons for the disappointment could be one of many – slowing demand, corporate hesitancy, shortage of microprocessor chips, supply constraints – and so we must keep an eye on whether such news comes up in local earnings announcements.
If the single currency is to move higher this week, it will likely need a weaker USD to go with it.
Despite crypto markets imploding last week, the relative increase in volatility elsewhere was slight and the USD has not been called on to be a haven currency from market ructions yet. With volatility remaining low, experience would dictate that this means investors will likely sell the USD for an opportunity to invest somewhere more exciting, typically in the emerging market space.
We expect that trend to continue this week given the lack of juicy US data set for release this week.
An article released and then deleted from the website of the People’s Bank of China advocating for a stronger currency to protect against high commodity prices has got the FX markets thinking. While senior members of the PBoC over the weekend reiterated their desire to keep the yuan stable, if the daily fixes of USDCNH move lower in the coming weeks, expect markets to buy the yuan and further depress the USD.
Today’s interbank rates at 08:23 against sterling. Movement vs yesterday.
|US dollar||$1.416 ↑|
|Australian dollar||$1.830 ↓|
|South African rand||R19.72 ↑|
|Japanese yen||¥153.9 ↓|
Have a great day everyone.