3 exchange rate moving developments to watch out for this week

Although the Caixin Chinese Manufacturing PMI showed some improvement on 2 November, risk demand didn’t rise significantly as the sector still remained in a definite state of contraction. Nevertheless, both the pound and euro benefitted as domestic Manufacturing PMIs showed unexpected increases on the month.

Confidence in the strength of the UK economy continued to grow throughout the previous week as both the UK’s Construction and Services PMIs also showed continued expansion. The services figure in particular was of great reassurance to traders as the sector contributes the largest single portion to the nation’s GDP. As such, speculation rose that the Bank of England (BoE) could be prompted to raise interest rates in the nearer future.

Volkswagen returned to the headlines mid-week as the carmaker admitted that 800,000 of its vehicles had recorded inaccurate carbon dioxide emissions and fuel consumption levels. Raising the prospect of further fines and recalls, this eroded confidence in both the company and the wider German economy to set the single currency on a persistent downtrend against rivals.

As traders struggled to gauge the odds of an imminent interest rate hike from the Federal Open Market Committee (FOMC) in December, the US dollar experienced a fair degree of volatility as the week’s domestic data proved generally mixed. An unexpectedly strong ISM New York Index and marginally better-than-forecast ADP Employment Change in particular drove the ‘Greenback’ up, offering support to assertions that the domestic economy could tolerate a change in the cash rate.

The pound/euro exchange rate rose from 1.40 to 1.41 last week, while the pound/US dollar exchange rate has weakened slightly from 1.54 to 1.53.

So, what should we be looking out for in the coming week?

Pound sterling (GBP) exchange rate movement likely on UK unemployment data

Following the more dovish outcome of the latest BoE policy meeting, where policymakers voted 8-1 to leave interest rates unchanged from their current low of 0.50 percent, the prospects of sterling stand to remain rather muted over the coming week.

On 11 November, the release of a raft of domestic unemployment data could offer the pound a rallying point, including Average Weekly Earnings, Employment Change and Unemployment Rate figures. However, as the number of unemployed is expected to show a slight increase on the month this could worsen the outlook of Sterling further.

Exchange rates can be extremely volatile. Look into registering for regular market updates if you want to stay up-to-date with the latest market movements.

Third quarter Eurozone GDP could extend Euro (EUR) conversion rate losses

Sentiment towards the euro is unlikely to see a particularly strong resurgence over the coming week, as European Central Bank (ECB) President Mario Draghi continues to talk up the chances of policymakers opting to introduce fresh monetary loosening measures in December.

On 13 November, the third quarter Eurozone Gross Domestic Product stands to provoke particular volatility for the single currency, as growth is expected to slow both on the quarter and on the year. Should the economy of the currency union show further signs of weakening, this is likely to spur a further downtrend for the euro.

US dollar (USD) exchange rate may see volatility on Advance Retail Sales

With all US data currently being scrutinised in an attempt to determine the direction in which the Fed will jump in December, the upcoming US Advance Retail Sales could still be of particularly strong impact to the ‘Greenback’.

Should consumer demand be shown to have increased on the month in October, as forecast, this would provide a further boost to bets of an imminent Fed rate hike, suggesting that the domestic economy continues to shrug off more negative global headwinds.

Exchange rate movements can be swift and dramatic, so if you’ve got a currency requirement coming up and want to move your funds at the right time you may want to have a chat with a currency specialist.

Contributed by TorFX

TorFX is a specialist currency broker that offers far better exchange rates than you are likely to receive from a high street bank.