In the past 12 days GBP has lost almost 6 cents against the US Dollar peaking at 1.436 dropping to its current level at 1.377. One of the main reasons for this drop is the rising concern between the UK and US interest rates. The governor of the Bank of England Mark Carney recently suggested the expected UK interest rate rise is not as certain as it once was causing this. International capital usually flows towards where it can gain the most interest, which is 0.5% in the UK compared to 1.75% in the US. This coupled with poor GDP data, which showed the UK economy is slowing down, has hit the Pound hard. Looking ahead it could be another poor week for the Pound as any bad news will be magnified, so it could be a time to sell Sterling if you are holding any.
After steadily weakening through the week against Sterling (1.14-1.15) EUR strengthened sharply to 1.135 against GBP. As expected the European Central Bank (ECB) left monetary policy unchanged at its April policy meeting last week. ECB President Mario Draghi was however surprisingly dovish on the economic outlook for the eurozone, talking down the impact of recent weak domestic data. This week the main data release for the EUR is the Consumer Price Index released on Thursday. The headline figure of inflation is expected to remain at 1.3% but the underlying details of the report will dictate where EUR ends the week, but off the back of Draghi’s comments last week it may be a good time to buy EURs as it is likely to strengthen.
GBP/USD hit a 7-week low last week as poor GBP data coupled with rising US treasury yields help rally the US dollar against most major currencies. Better then expected US GDP figures also helped strengthen the Dollar. The Fed are expected to keep interest rates at 1.75% this week but all eyes will be on the report and a hawkish view is expected which would continue to see the Dollar strengthen against most major currencies. It could be a good time to buy US Dollars now before the meeting on Wednesday.
Mon: AUD RBS’s Governor Philip Lowe Speech
EUR GER Harmonized Index of Consumer Prices (YoY)
USD Core Personal Consumption Expenditures
Tue: AUD RBA Interest rate decision and statement
CAD BoC Governor Poloz speech
Wed: EUR Gross Domestic Product
USD Fed interest rate decision and Monetary Policy Statement
THUR: EUR Consumer Price Index
FRI: USD Nonfarm Payrolls