3 exchange rate moving developments to watch out for this week
In a week rammed with influential news items, market movement was fairly stilted. While the pound did gain on both the euro and US dollar following the publication of impressive UK jobs data, the gains were slightly limited ahead of the Federal Open Market Committee’s (FOMC) interest rate announcement.
Earlier in the week, UK inflation data showed that the annual pace of consumer price gains slowed to 0 percent again – a development forecast by the Bank of England (BoE) but one unlikely to support the argument in favour of higher UK borrowing costs.
The jobs numbers, which included a surprising decline in unemployment and a much stronger-than-expected increase in average earnings, made up for the inflation report however and sent the pound above 1.37 against the euro and beyond 1.55 against the US dollar.
Sterling largely held these gains in the hours leading up to the FOMC announcement, although it did cede some ground to the euro following the upbeat construction output numbers for the Eurozone.
So, what should we be looking out for next week?
UK data lacking, BoE rate bets to support pound sterling (GBP) exchange rate trading?
After this week’s influential UK numbers, next week is looking pretty sparse in terms of UK ecostats, with only the nation’s public finance figures likely to cause much movement.
In this low-news environment the UK’s Rightmove house price figure and the BBA loan for house purchase number will be of some interest, although pound sterling movement is more likely to be caused by external developments.
This week several key BoE officials intimated that borrowing costs may be increased in the second quarter of next year rather than the third, with Kirstin Forbes going so far as to say that she may begin voting for higher interest rates in the very near future. If any more BoE policymakers issue provocative statements next week they could have an impact on demand for the pound.
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) exchange rate movement possible on Greek election news
The second Greek election of 2015 is due to be held on 20 September, with the result currently appearing too close to call. The latest poll sees the centre-right New Democracy (ND) party just edging ahead of Syriza – but only by a whisker.
There remain a high number of undecided voters so the result still has the potential to be a complete surprise.
If neither Syriza nor ND secure enough votes for a majority, a coalition will have to be formed. If any partnerships which could put the terms of the Greek bailout at risk appear likely, the euro could come under pressure.
Syriza leader Alexis Tsipras recently asserted; “The battle of 20 September is the second great referendum for the future of our people and our country. On Sunday we vote to reject the return of the old status quo of servitude, dependence, corruption and vested interests. […] Every vote lost by Syriza is a vote won for New Democracy.”
US dollar (USD) conversion rate responsive to durable goods, PMI data
The fallout from the FOMC decision could have an impact on US dollar exchange rate trading next week, but investors will also be focusing on the latest run of influential ecostats for the world’s largest economy, including Durable Goods Orders data and both Services and Manufacturing PMIs.
Signs that the slowdown in China and other global economic headwinds are having a detrimental impact on the ‘Greenback’s performance could push the US Dollar lower over the course of the week.
Conversely, positive numbers could boost the US dollar against peers like the pound and euro.
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