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It looks like the Pound may have finally found some footing against both the US Dollar and the Euro, although it will be macro data released this week that will have the greatest impact on all three currencies.
Major event risk for currencies this week comes in the form of Q3 GDP expectations for both the UK and the US on Thursday and Friday respectively. The former is seen to slow from 0.7% in the second quarter to an expected 0.3% and, if met (or misses), shows that the effect of Brexit on the economy may be delayed after all despite relatively positive UK macro data since June 23rd.
Bank of England Governor Mark Carney’s appearance before the House of Lords will be eagerly watched for any hint at the outcome of next month’s MPC meeting, although the central bank head is likely to advocate a wait-and-see policy with GDP and inflation data still to be released. Continued Brexit commentary from ministers and the Prime Minister alike will, as ever, provide impetus for GBP movement against its peers.
The Euro is nearing 8-month lows against the Dollar, even if it is holding its own against the also weak GBP, following Thursday’s ECB monetary policy update and Mario Draghi’s tight-lipped press conference that followed. Macro data from Eurozone powerhouse Germany is likely to provide the largest domestic influence on the currency throughout the week, with IFO surveys on Tuesday morning hoping to echo Monday morning’s 10-month high PMI figures. However, it is once again likely that the USD will continue to be dictate the Euro’s standing.
The US Dollar continues to move from strength to strength, with the Dollar Basket Index finishing last week with another break out, this time above the 98 mark. Should aforementioned Q3 GDP estimates meet with expectations and produce a figure of 2.5% (from 1.4% reading in the previous quarter) the USD stands to rally further against its languishing European peers. A strong beat of expectations may all but confirm a US Federal Reserve rate hike in December (save for a surprise Republican win in the Presidential Election with Trump falling further behind in the polls) with probability of a hike currently standing at around 66%. With a surprising lack of Fed speakers throughout the week, US PMI data and Durable Goods Orders for September may also impact the strength of the Dollar before Friday’s headline Q3 GDP release.
Key data this week (Sign up here to get our daily live macro-calendar)
UK Economic Announcements
12:00 CBI Realized Sales
Intl Economic Announcements
8-9am PMI Manufacturing & Services (EZ)
14.45 PMI Manufacturing (US)
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UK Economic Announcements
07:00 Nationwide House Prices
Intl Economic Announcement
07:00 GFK Consumer Climate (DE)
09:00 IFO Surveys (DE)
14:00 S&P House Prices (US)
15:00 Richmond Fed, Consumer Confidence (US)
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UK Economic Announcements
00:05 GfK Consumer Confidence
09:30 BBA Home Loans
Intl Economic Announcements
14:45 PMI Services (US)
15:00 New Home Sales (US)
15:30 Crude Oil Inventories (US)
—
UK Economic Announcements
09:30 GDP, Index of Services
Intl Economic Announcements
08:55 Unemployment (DE)
13:30 Jobless Claims, Durable Goods, (US)
15:00 Pending Home Sales (US)
—
UK Economic Announcements
10:30 Mortgage Approvals, Lending
Intl Economic Announcements
08:00 GDP (ES)
08:45 CPI Inflation (FR)
10:00 Confidence surveys (EZ)
13:30 GDP (US)
15:00 Consumer Confidence (US)
Technicals
Technicals
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