Weekly Market Report 05/02/2018

GBP

The key event for Sterling this week in the Bank of England (BoE) rate meeting on Thursday, Feb 8 at 12.00 GMT. Although there is no change expected in interest rates, the focus will be on any clues given to future interest rate decisions. This is achieved through analysing voting patterns, the wording of the statement and BoE governor Mark Carney’s responses to questions in the press conference.  GBP/EUR has traded between 1.115 and 1.151 for the best part of 6 months now, touching a high of 1.1513 last week. However, this triggered a flood of sell orders which pushed the rate to 1.1339 at the time of writing. For Sterling to break the key trading level of 1.15 and stay there, Carney will have to be very hawkish regarding future rate decisions.

EUR

Markets will have a keen eye on ECB president Mario Draghi’s speech on Monday. He is due to present an annual report to the European Parliament in Strasbourg. It is expected that he may hint at a sooner end to QE asset purchases then currently expected which will see the EUR rise. There’s very little Eurozone data in the coming week to threaten the currency’s positive outlook. The little data that is out this week for the Eurozone is not significant enough to affect the single currency so other then the Draghi speech the EUR price will largely be driven by other major currency news. If you have EURs to buy from Sterling, it could be a good idea to look at a forward contract to secure a rate against the strong EUR.

USD

USD ended a 7-week losing streak last week as investors reacted to the latest Non-Farm payrolls on Friday. The US Dollars recovery could continue this week as more positive data is expected. Monday’s PMI from ISM and December trade data on Tuesday is expected to be positive to help strengthen the currency. It is looking like a great time to buy USD if you are holding other major currencies as it is currently sitting very close to a 2 year against the EUR and 18-month high against GBP.

The Dollar traded higher last week after the release of positive employment and wage data on Friday and the market will be expecting more of the same in the week ahead.

Monday sees the release of the Non-Manufacturing ISM. The ISM is deemed as a key source of knowledge for gauging the health of Non-Manufacturing. Monday’s data is expected to show a slight decline to 57.2 from 57.3 previously (December). A score above 50 indicates expansion in the sector. The other main release for the Dollar is the trade balance on Tuesday, which is forecast to show the deficit widen to -52.0bn in December from -50.5bn previously.

WEEK AHEAD

 

Monday: EUR: ECB President Mario Draghi speech

 

Tuesday: AUD: RBA Interest rate decision and statement

 

Wednesday: EUR: Non-monetary policy ECB meeting

NZD: RBNZ interest rate decision and monetary policy statement. RBNZ press conference.

 

Thursday: GBP: BoE asset purchase facility.

BoE interest rate decision and Monetary policy summary.

BoE minutes.

Friday: AUD: RBA Monetary Policy Statement.

CAD: Unemployment rate.

 

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