3 exchange rate moving developments to watch out for next week
The last week has been fairly dismal in terms of producing market-moving ecostats, but developments from China and interest rate hike speculation has inspired GBP, EUR, USD exchange rate movement.
The pound sterling to euro (GBP/EUR) exchange rate achieved a one-month high of over 1.38 on Monday off the back of relatively hawkish interest rate related comments from the Bank of England’s (BoE) deputy governor.
The gains proved short lived however, with UK public finance figures disappointing expectations and the belief that the BoE won’t increase borrowing costs until after the Federal Reserve weighing on the pound.
Sterling’s downtrend against the euro continued as European Central Bank (ECB) President Mario Draghi alleviated concerns that quantitative easing will be expanded in near future and bolstered demand for the euro in the process. Before the weekend, the pound had fallen back to trending in the region of 1.35 against the euro and 1.52 against the US dollar.
So, what should we be looking out for next week?
Pound sterling (GBP) exchange rate movement may follow growth, PMI data
Next week has slightly more scheduled in the way of UK data, so we may see greater pound movement then we have over the last five days.
While some of the releases, like Mortgage Approvals, are of comparatively low volatility, the nation’s GfK Consumer Confidence index will be of interest, as will the UK’s final growth data for the second quarter. A revision from the previous annual estimate of 2.6 percent and quarterly estimate of 0.7 percent may cause notable GBP movement.
The UK is also set to publish its Manufacturing and Construction PMIs for September. Given that both measures slid in August, investors will be hoping for proof of expanding growth in order to support hopes for higher UK borrowing costs in Q2 2016.
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.
Euro (EUR) xechange rate volatility could follow inflation numbers
Although ECB President Mario Draghi indicated that the central bank doesn’t intend to expand QE until it knows how the current programme is effecting the Eurozone, if upcoming ecostats for the region fail to impress and the euro remains resilient, the ECB may have to take action sooner rather than later.
For that reason, any disappointing high-profile reports for the currency bloc could have a significant impact on demand for the euro.
Of next week’s releases, the most influential is likely to be the Eurozone’s Consumer Price Index for September.
The ECB has cited the inflationary climate as a cause for concern, so falling consumer price pressures would up the odds of QE being expanded and drive the euro lower against peers like the pound and US dollar.
US dollar (USD) conversion rate outlook may change on NFP report
Speculation surrounding the odds of the Federal Reserve increasing interest rates in 2015 has been a driving force behind US dollar movement for months now and until the prospect is completely ruled out, rate hike related events will continue effecting the ‘Greenback’.
Next week’s US Non-Farm Payrolls report could have a dramatic impact on Fed rate bets, so the report is likely to trigger considerable USD movement. The US economy is believed to have added 200,000 positions in September. A better-than-forecast result, or an uptick in average earnings, would be US dollar supportive.
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