Whilst markets in the UK close early this week for Good Friday, some potentially volatile releases in the US could shake things up a bit.
Foreign Currency Market Update – GBP / USD Update
The Sterling/US Dollar exchange rate improved upon last week’s performance to reach another 20-week high of 1.6062 yesterday. Strong Manufacturing data from China in the overnight Asian session sent the Pound higher as global risk sentiment improved which reduced the Dollar’s appeal as a safe haven currency.
The week has started encouragingly for the Pound as strong Manufacturing PMI and Construction PMI figures have helped to stem fears that the UK may have slipped into recession in the first quarter of 2012. Manufacturing PMI showed an increase from 51.5 to 52.1 and Construction PMI improved from 54.3 to 56.7. Both figures remained above the crucial 50.0 mark that separates growth from contraction and both figures improved more than markets had expected which gave Sterling the support it needed to stay afloat above 1.60.
Last week the Pound took a knock to its ego as the Office for National Statistics revised their fourth quarter GDP evaluation for the UK economy in 2011 down from -0.2% to -0.3%. Markets initially took it upon themselves to punish Sterling for its economic underperformance and fears arose that the UK may not have done enough in the first 3 months of 2012 to claw itself back into growth. However fears of a technical recession were short lived in the minds of investors and the Pound to US Dollar exchange rate swiftly retreated from a 40 pip loss to a more gentle 10 pip shortfall.
Looking ahead to this week and the main market movers will come in the form of central bank announcements. The US Federal Reserve release their FOMC meeting Minutes this evening and all ears will be scrutinising the report for signs of further quantitative easing – if QE3 seems imminent then the Dollar could retract further, but if accommodative stimulus seems unlikely then expect the Greenback to fight back against the Pound. It’s a similar story where the Bank of England are concerned – leave QE off the menu and Sterling could sustain its recent gains, but if further stimulus is mentioned the Pound may begin to slide.
Whilst markets in the UK close early this week for Good Friday, some potentially volatile releases in the US could shake things up a bit. US Unemployment is predicted to stay at 8.3% and US Non-farm Payrolls are expected to show an increase of 205,000. However, if results deviate from analysts expectations the market response could be less vigorous than usual as investors prepare for a worldwide closedown on Easter Monday.
Summary of major upcoming data releases that we think may move the market.
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Kiwi surges 8% in four weeks
- Pound Sterling, the Euro and US Dollar exchange rate news – The Pound rallied towards the highest level in six weeks against the Euro
- The Pound to Dollar rate improved from 1.550 in the morning
- Sterling has managed to make new highs four weeks on the trot
- Pound Sterling, the Euro and US Dollar Currency News – The Pound declined to the lowest level in three weeks against the US Dollar