Exchange rate moving developments to watch out for next week

After last week’s pandemonium beginning with ‘Black Monday’, the present week has seen a decidedly more stable run of events: currency pairings are largely behaving as expected, and China’s economy has, for the most part, resumed its regular movements. 

Purchasing Managers Indices (PMIs) have been the primary cause of elation and disappointment for the pound, the euro and the US dollar this week, with expected and unexpected results triggering some major shifts in all six possible pairings. 

The pound was damaged by lacklustre results in the UK PMI for Manufacturing for August on 1 September 2015 after the figure fell from 51.9 to 51.5 instead of climbing marginally upwards to 52 as had been predicted. The same fate befell the UK Markit/CIPS Construction PMI on 2 September, which also failed to live up to expectations. 

For the Eurozone, 3 September was a tremendously beneficial day in terms of PMI results; all bar the French Composite and Services PMIs for August rose over forecasts, which triggered a brief rally for the euro against competitors during the morning. Unfortunately, however, the European Central Bank’s (ECB) decision to freeze the interest rate at 0.05 percent and ECB President Mario Draghi’s subsequent pessimistic remarks soon sent the euro plunging back down against rivals. 

The US was somewhat unique out of the three currencies this week in that its PMI results were all clearly positive. The Manufacturing PMI for August on 1 September grew beyond expectations, as did the Composite and Services figures on 3 September. The Non-Manufacturing Composite also dropped by less than had been expected, although the ISM Manufacturing score did fall substantially from 52.7 to 51.1. 

The pound/euro exchange rate closed out last week in the region of 1.37 and has remained close to this figure today, while the Pound/US Dollar exchange rate has softened considerably from 1.54 to 1.52. 

So, what should we be looking out for next week? 

Pound sterling (GBP) exchange rate stalemate expected from current predictions 

Since the most dramatic impacts of the stock market crash have faded away this week, the next week seems set to reflect the more relevant GBP to EUR exchange rate trends. 

The biggest news coming out for the pound next week is based on 9, 10 and 11 September. On 9 September, the UK Trade Balances for July will be published, as will the influential NIESR GDP Estimate for August.  

Tenth September holds the Bank of England (BoE) Asset Purchase Target and Interest Rate Decision for the month, although no change is expected to the current UK interest rate of 0.50 percent. As BoE Governor Mark Carney failed to conjure up any real support for the pound  while speaking at the Jackson Hole Symposium over the weekend, any changes to policy will likely have a major impact on its faring against the euro.  

Despite the predicted freeze of the interest rate, it will be worth checking up on this announcement in the future when the BoE minutes are released, as these will reveal any potential dissent among BoE policymakers regarding the decision. The inflation target of the BoE for the next month will also be keenly scrutinised, although this is being announced the day afterwards, on 11 September. 

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.  

High European investor confidence and GDP deviations may unsettle EUR/GBP conversion rate 

The Euro’s showing in the next week will be chiefly decided on 7 and 8 September, with the Eurozone Sentix Investor Confidence survey for September and the Eurozone Q2 GDP figure respectively. 

Although no predictions have currently been made for what the Sentix score will be, a 1.2 percent stagnation has been predicted for the Eurozone’s GDP. It is worth bearing in mind, however, that the glut of positive PMI releases for the Eurozone this week may have the effect of inspiring an increase in this figure, however slight.  

With such an occurrence going against forecasts, the Euro would likely swell in support from speculators against the pound.  

US dollar (USD) conversion rate outlook reliant on US non-farm payrolls  

For the US dollar’s movement against the pound, the claims and confidence figures should be consulted.  

The US Initial and Continuing Claims data to 5 September and 29 August (to be released on 10 September) is expected to be a major influence on the standing of the ‘Greenback’, although the University of Michigan Confidence score for September is likely to eclipse possible detractions to confidence in the US dollar. The Score previously came in at 91.9, and while predictions are only for a fractional increase to 92, this is by no means set in stone and a wildcard swing is still very much a possibility for the survey score. 

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.