Currency Note

Sterling recovers ahead of UK inflation data

By Callum Holmes April 11th, 2017

sterling slips

Not even two days into the new week and we’ve already seen the pound first drop and then strengthen again. If you want to discuss how currency volatility affects your business or get a free currency health check, get in touch or start by watching our webinar on this topic. It’s available on demand now.

Back to currency movements:

GBP: this Easter week sees sterling hunting down a gain

With parliament in recess for the Easter holidays, it’s unlikely that we’ll see any significant Brexit developments. Instead, markets will focus on the economic health of the nation.

This shorter week before the Easter weekend started with some positive news for sterling. The UK currency was actually the best performing currency in the markets yesterday, ahead of some key economic releases. This indicates that the markets believe that the upcoming data could hatch a positive surprise.

Today, we’ll see the latest UK inflation data. The consumer price index is the Bank of England’s preferred measure of inflation. It’s expected to remain above the 2% target but decline slightly to 2.2%.

Tomorrow, UK employment data is set for release. The claimant change, which is the number of people claiming unemployment-related benefits, is expected to decline. The key highlight will be the average earnings figures, representing the three-month moving average compared to the same period a year ago. This figure is expected to fall below inflation, which will concern the central bank and government.

On Thursday the quarterly BoE credit conditions survey is set for release.

EUR: ECB Vice President reinforces current monetary policy

On what was a relatively quiet day in terms of economic data, we again saw updates regarding the Eurozone’s monetary policy. European Central Bank Vice President Vitor Constancio stated that against the current inflation, the current degree of monetary accommodation was appropriate. This further reinforces ECB President Mario Draghi’s comments from last week.

The German ZEW figures are due out today. This is a survey of up to 300 German institutional investors and their expectations for the next six months.

Eurozone industrial production data is also set for release.

Looking ahead, we’re entering the final phase before the first round of the French presidential elections, which is adding to uncertainty in Europe.

USD: Fed Vice Chair provides some relief

It’s been a fairly quiet start to the week for the dollar, which saw very little movement. Federal Reserve Vice Chair William C Dudley helped relieve market sentiment slightly by announcing interest rates could still rise while the central bank is reducing debt levels.

Markets will also be keeping a close eye on any geopolitical tensions in relation to Syria and, although not necessarily dollar-specific, the developments on the Korean peninsula.

Data out later this week is going to be more related to consumer spending: retail sales for March and consumer sentiment for April, which is forecast to increase slightly. However, it is unlikely that we’ll see any major movements as long as they fall roughly in line with expectations, so the impact on the US dollar should be fairly subdued.

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