Weekly Round-Up & The Week Ahead

Weekly round-up and a look at the week ahead for EUR, GBP, and USD.

USD

The Greenback continues to be the key driver for currency markets at present with volatility across the market last week. A contraction in ISM Manufacturing PMI remained in line with expectation at 47.2, down from 47.5 expected on Tuesday. A bearish reading for the States was directly contrasted by an expansion in the Services PMI reading on Thursday which saw a large expansion of 54.9 Vs 51.7 expected. The Labour market held strong this week with ADP Employment Change reading 143k vs 120k expected and 103k in the previous release, followed up by Average Hourly Earnings rising to 0.4% vs 0.3% expected and Non-Farm Payrolls rounding off the labour releases with a sharp increase of 254k vs 140k expected and 159k last time out. Despite the abundance of key data coming out of the US last week it was two external factors that were the key drivers for market movement against its G3 counterparts. Geo-political tensions heightening in the Middle East on Tuesday saw investors return to the safe haven of the US Dollar and Governor Bailey’s dovish tones in last week’s interview saw USD recover a lot of recent losses vs Sterling.

Investors will have further data to ponder this week both internally with FOMC Minutes, CPI, PPI and the Michigan Consumer Sentiment Index as well as externally as geo-political tensions continue to drive a US Dollar recovery.

GBP

A quiet week for Sterling had been anticipated last week with the only main reading to be the GDP release on Monday. GDP reported at 0.5% MoM down from 0.6% expected and 0.6% at last months reading. However, the solid recent run of Sterling was undone mid-week when Bank of England Governor Bailey insinuated a more dovish tone from the Bank of England stating that they would be more aggressive with rate cuts should inflation data allow them to. With the first budget under a labour government also fast approaching and geo-political tensions driving a US Dollar recovery, it is understandable that the market has checked the Sterling gains and the uncertainty of what to come makes pulls investors away. Following Bailey’s comments we see GBP/USD drop from 1.3422 at opening last Monday to 1.3109 at this morning’s reading with a less dramatic increase for EUR/GBP as we see only a slight uptick from 0.8337 to 0.8362 between the same time frames.

Alike last week, a fairly data light week for Sterling this week with no key data expected to be released however, with market movement likely to be driven from its G3 counterparts and the external factors still currently at play, it would be unwise to mistake the lack of data for a lack of volatility.

EUR

The Eurozone continues to look fragile with major gains for the Greenback against the Euro last week. Had it not been for Governor Bailey’s speech we may have seen Sterling continue to test new levels of resistance against the Euro. German CPI Data dropped back to 0% on Monday versus the expected 0.1% from traders. With Eurozone Core HICP and HICP both dropping back on expectations to 1.8% vs 1.9% and 2.7% vs 2.8% respectively the narrative of further ECB rate cuts to close out the year does not look to have been weakened. The market is currently pricing in another 25bp cut from the ECB at the 17th October meeting and unless data dramatically changes before then, it seems unrealistic to expect anything less.

This week the market will look to scrutinise the data further as we see Retail Sales this morning at 10am expecting an uptick from last months readings as well as Germany’s HICP reading at 7am on Friday. With EUR/USD dropping to 1.0965 at open this morning down from 1.1208 last week, it seems the market has corrected recent Euro strength against US Dollar and this week could be key to see where the price direction will move in the coming months.

Daily Rates

If you need a live exchange rate or quote, give us a call, email us, or request a call-back.

If you have not already registered with us the quote will be indicative.