Sterling
Friday's Manufacturing PMI release undermined sterling badly. Coming in three points below forecasts, the release indicates that that purchase managers expect a contraction in this key industry sector next month. Sterling plummeted on the news, losing Thursday's gains and more, falling below the 1.50 mark against the dollar for the first time in over two and a half years. This week is packed with major events for sterling with the release of similar data from both the construction and services sectors, both equally influential, on Monday and Tuesday. If they both disappoint as much as the manufacturing release did, it would not surprise if sterling settled below 1.50. The Governor of the Bank of England speaks on Wednesday, ahead of Interest Rate and Asset Purchasing releases on Thursday. Last month the path was lit for increased quantitative easing as the Governor, crucially, was one of three members of the Monetary policy committee voted in favour. If any move is made, expect sterling to suffer, and expect more volatility that usual ahead of the release as traders place bets on what will happen. Get in touch for the latest news and rates for the pound.
Euro
The euro struggled on Friday as figures showed that the overall level of unemployment had reached a new record of 11.9% whilst inflation figures also fell short of markets estimates. Manufacturing PMI released came out more or less as expected showing an overall contraction figure of 47,9 [above 50 is expansion], and the markets will look closely to the services figures today for influence. This week the focus will largely be on Thursday with the European Central Banks’s rate decision and press conference, furthermore, traders will play close attention to the Eurogroup and the Economic and Financial Affairs Council (ECOFIN) meetings that will take place. Uncertainty surrounding Italy's political future remains as the country remains in political deadlock following the recent electoral vote. Until there is some form of resolution the markets are bound to stay nervous. Call in now for the latest news and changes in the euro rate.
The US dollar performed well on Friday as risk appetite dominated the headlines due to the sequestration cuts that came into effect over the weekend - dropping below 1.50 and 1.30 against sterling and the euro respectively. To date, there has been no progress and so $85 billion worth of spending cuts over the next fiscal year have been signed into effect, with $1.2 trillion worth of spending cuts over the next 9 years. The fear is that not only will this harm growth in the US; but, the knock on effect means it will harm global growth as a whole. Other data out on Friday showed that Manufacturing PMI data better than expected whilst consumer sentiment figures beat market forecasts. Non-Manufacturing PMI figures and trade balance data will be released this week alongside a raft of unemployment data which includes the highly influential non – farm pay roll data which will be announced on Friday and is always watched extremely closely by investors. The expectation is for 151,000 jobs to be added which is slightly less than last month's figure. Also, a number of members from the Federal Open Market Committees (FOMC) will be speaking this week and their comments have often caused volatility in the past. Speak to one of your traders to see how you can potentially make this volatility work in your favour.
Elsewhere, Manufacturing PMI data from China fell slightly short of market forecasts and Canadian GDP figures came out as expected showing the economy had contracted by 0.2% causing the Canadian dollar to weaken.There is a lot of data out this week and in particular from Australia with a swathe of information being released including monthly retail sales figures, GDP figures, trade balance data and the central bank’s interest rate decision which is expected to be kept at 3%. There is a raft of data out of Canada which includes building permits figure, trade balance data, unemployment data and the central bank’s interest rate decision. Also this week we have the Bank of Japan's monetary policy decision and inflation data and trade balance data from China. Call in now to lock in a price.
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