The US published a highly disappointing US Non-Farm Payrolls report and the data set the tone for the beginning of this week’s trading session.
With the US employment numbers falling short on all fronts, the odds of an October interest rate adjustment from the Federal Reserve fell dramatically, leaving the US dollar to soften against the majority of its peers.
The US dollar held these declines over the weekend, with the softness in the ‘Greenback’ driving the euro higher by default.
The pound, meanwhile, came under pressure as the UK’s Services PMI disappointed expectations by showing an unexpected easing in output. The GBP/EUR pairing was left trading close to its lowest levels since May but managed to return to 1.36 after the UK published better than expected Industrial and Manufacturing Production data.
While the advance was a little undermined by the Bank of England (BoE) publishing comparatively dovish policy meeting minutes, the GBP/EUR exchange rate did remain clear of the lows recorded at the beginning of the week.
So, what should we be looking out for this week?
UK inflation to dictate pound sterling (GBP) exchange rate movement
In the Bank of England (BoE) meeting minutes, low domestic inflation was cited as one of the reasons why borrowing costs can stay at record lows for longer. Subsequently, investors will be paying close attention to the UK’s Consumer Price Index releases over the next couple of months and keeping a sharp eye out for any increase in price pressures.
If next week’s CPI shows that British inflation moved away from the 0.0 percent annual figure recorded in September, the pound could rally. However, a move into negative inflation may see sterling tumble.
The UK’s latest employment numbers are also due out this week and are likely to have an impact on GBP trading.
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.
German ZEW data to have impact on euro (EUR) exchange rate
Influential ecostats for the currency bloc are in fairly short supply this week, with final inflation figures for Germany and the Eurozone as a whole unlikely to have much of an effect on the Euro unless they differ considerably from previous estimates.
Of the reports scheduled for release, the German ZEW Current Situation and Economic Sentiment figures may prove to be of most interest. An increase in sentiment may give the euro a lift, but if more reports for the Eurozone’s largest economy fall short, bets that the European Central Bank (ECB) will expand stimulus before the close of the year could see the euro tumble.
US dollar (USD) conversion rate to respond to US CPI, sales data
Expectations for a 2015 interest rate adjustment were severely dampened by the NFP report and if US ecostats keep adding to the argument in favour of borrowing costs remaining at record lows for longer, we may see the US dollar falter against peers like the pound and euro. The reports to be aware of include the nation’s Advance Retail Sales figure and Consumer Price Index. Reduced consumer spending or a slower rate of inflation would be ‘Greenback’ negative.
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.