3 exchange rate moving developments to watch out for this week – Eurozone inflation, US non farm payrolls, UK PMIs

The GBP/EUR exchange rate moved between highs of 1.4115 and lows of 1.3880 in response to the latest developments in the Greek bailout saga and UK interest rate-related comments while the GBP/USD currency pair trended in the range of 1.5674 to 1.5905 ( a seven-month high). ‘Cable’ did soften after a Federal Reserve official implied that US interest rates could be adjusted twice in 2015, but sub-par US service sector growth helped the pound recoup losses towards the close of the week.  

Next week is much more action-packed in terms of ecostats for the UK, Eurozone and US, so we can expect some notable currency-market movement.  

Here are the week’s three main economic events:

Eurozone consumer price index  

The latest Greek tragedy has been dominating headlines since Syriza came to power five months ago, with concerns the Hellenic nation is going to default on loan repayments to the International Monetary Fund and be booted from the Eurozone keeping the common currency under pressure. With the nation scheduled to make a hefty payment next Tuesday, Greek woes will continue driving euro movement until then.  

That being said, some common currency fluctuations may also be inspired by the run of influential economic reports scheduled for release over the course of next week – with perhaps the most important being Eurozone inflation figures. Eurozone CPI is expected to print at 0.2 percent in June, year-on-year, but a move towards deflation would be euro-negative. Look into registering for regular market updates if you want to stay up-to-date with the latest market movements.  

US non farm payrolls  

The biggest contributor to US dollar volatility at the moment is speculation surrounding the potential timing of Federal Reserve interest rate revisions. Earlier in the year it had been projected that borrowing costs would be raised in June, but a marked slowdown in US economic output in the first quarter of the year scuppered those plans. Rate hikes were then put back to September, and then December as various industry experts and officials intimated that the US economy isn’t strong enough to warrant higher interest rates just yet.  

However, other sources have been more hawkish (with the Fed’s Jerome Powell hinting at two possible rate adjustments this year) and if US data does start picking up, a September hike could be put back on the table. While ecostats like the ISM manufacturing gauge will impact ‘Greenback’ trading, the non farm payrolls report is the one to watch. A decrease in unemployment or increase in average earnings would be US Dollar supportive. Conversely, disappointing numbers would take a heavy toll on demand for the ‘Greenback’.  

UK manufacturing/services/construction PMI  

As positive UK data will support the case in favour of the Bank of England (BoE) adjusting borrowing costs sooner-rather-than later over the next few months, investors will be keeping a close eye on the upcoming UK releases.  

Of next week’s reports, the ones most likely to influence BoE rate hike bets include the UK’s manufacturing, services and construction PMIs. Should the indexes show a faster rate of expansion in these key sectors, the pound is likely to gain.   

Exchange rate movements are impossible to predict, so if you’ve got a currency requirement coming up and don’t want to move your money at the wrong time you may want to have a chat with a currency specialist.