Sterling
Sterling has had a steady week which contrasts to its loss of value and high volatility in the first quarter of this year and also given there was lots of news this week. The Bank of England met and decided not to inject a wave of fresh stimulus into Britain's ailing economy but instead hold the current level of asset purchases steady. They also kept interest rates on hold. Sterling saw a marginal rise following Britain's services sector recording its strongest growth in several months. This was in contrast to the data from the Manufacturing and Construction Purchase Manager's Indices (PMI) which once again disappointed, causing sterling to fall by up to a per cent midweek against its major counterparts. The most important factor though was the news from the country's dominant services sector which makes up 75% of the economy’s output suggesting the UK may well dodge a triple dip recession having picked up steam throughout March. Call us now for the latest news and up to the second prices.
It was a busy week in Europe with the ECB keeping interest rates on hold and the news that the International Monetary Fund would provide 10 billion euros of aid to Cyprus. The comments from the President of the ECB also helped calm the markets when he outlined that the central bank will keep an accommodative monetary policy whilst stating that the model that has been taken for Cyprus is not a template for future bailouts. On a more negative tone, unemployment rates have now reached record highs of 12% highlighting the probability of compounded contraction in the first quarter of this year. Manufacturing PMI in Europe showed another month of contraction as did the Services sector, in spite of beating market estimates. The final GDP reading released this morning is expected to confirm that the Eurozone contracted by -0.6%, whilst retail sales data is also projected to fall by -0.3%. Call in now for the latest rates and a live update.
The US dollar has had a mixed week and was then weakened significantly yesterday evening following comments from one of the members of the Federal Open Market Committee who said the current monetary policy is “over accommodative” and that imbalances could "unwind in a disruptive manner”. PMI data this week also disappointed, falling short of market estimates but still showed clear industry expansion for both the Services and non-Services sectors. On the job market front, the ADP National Employment Report came out weaker than expected as did the number of new people claiming unemployment related benefits. With these poor releases in mind and the Federal Bank’s monetary policy being so closely linked to the labour market, today’s highly influential non-farm unemployment data and overall rate of unemployment will be of particular importance to the US dollar relative strength in the short term. Other data released from the States today includes trade balance data, so get in touch for the latest news and market updates with Smart.
Elsewhere, the Japanese yen was once again the big story of the week, making gains as traders started to bet against the new Governor imposing the ultra-loose monetary policy that had originally been touted but was then sold off aggressively after the new Governor exceeded many analysts expectations by expanding its monetary stimulus program by doubling the monthly purchases in an attempt to drive up inflation. The Australian dollar also had a busy week after the Reserve Bank of Australia (RBA) kept interest rates on hold and positive data was released in the form of building approvals statistics, retail sales data and figures showing the nation’s trade gap had narrowed. It is a busy day for Canada with unemployment data, trade balance figures and PMI data all on the economic calendar leading to the potential for increased market activity for the Canadian dollar.
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