Market Report Election Week – Foreign Currency Direct
The most noticeable event happening in this week will be the UK public going to the polls for the general election. The bookies are backing the Conservatives to gain a majority with odds of 1/3. The odds on a Labour majority is 20/1 and for no majority currently sits at 5/2 with Bet365. The odds are also being backed by Jeremy Stretch at CIBC World Markets who believes a Tory majority is the most likely outcome. The pound may be in for some fluctuation with the build-up to Thursday with Michael Brown, senior analyst at Caxton believing that the pound may weaken on the build-up to the vote, however this morning GBP-EUR has broken through 1.19.
Other economic data released to look out for this week are in the UK are Tuesdays Manufacturing production (YoY) data which is predicted to strengthen all be it minorly. Also, GDP data is set to be released and FXstreet are expecting a rise from -0.1% to 0.1% from the previous month. This rise from negative to positive may increase the strength of the pound, both pieces of data are set to be released at 9:30am tomorrow.
The Euro is likely in for an eventful end to the week as well with lots of major releases of data on Thursday. The biggest announcement being the interest rate decision from the European central bank (ECB). The decision of the ECB can influence the Euro, an increase in interest rates can cause gains, however if the rates are cut there is a likelihood of the Euro weakening. The rates are predicted to stay pretty much where they are but anyone looking to buy or sell Euros should keep an eye on this changing piece of data.
The results of the ZEW (Zentrum für Europäische Wirtschaftsforschung) survey are also being released tomorrow and if the investors asked are positive and optimistic for the future, we could see the Euro strengthen. However if they believe that the future is less positive the Euro may see weakness. Speak to your account manager to see how you could potentially benefit from changes to the Euro over the coming week.
The US dollar has a lot of potential to change over the coming week. Tuesday is seeing data releases of Non-farm payroll productivity and unit labour cost which are not predicted to change dramatically with Non-farm looking to gain by 0.1% to -0.2% and Unit Labour to weaken by 0.1% to 3.5%.
Wednesday is set up to become a big day for the US economy with the Federal Reserve releasing their projections for inflation and economic growth over the next 2 years. Also, in this report will be each members of the Federal Reserve interest rate forecasts. The Federal Reserve is also reporting on interest rates with an increase causing an increase in Dollar strength. The Fed’s rate decision for the Monetary Policy Statement is also coming out which is known to create volatility and can cause a short term negative or positive change in the US dollar. If you are looking to move US dollars, keep an eye out for the release at 7pm on Wednesday and speak to your account manager for more information on how the data releases could affect you.
The Swiss National bank (SNB) is set to release its latest Interest Rate Decision and a Monetary Policy Assessment Thursday morning. If it comes out positively, it should cause price stability and build blocks for future strength. The assessment projects the economic outlook and offers clues on the outcome of future rate decisions, the assessment also contains the SNB’s decision of the current economic outlook, a negative outlook may cause the CHF to reduce in strength. These reports will be released by 8:30 on Thursday the 12th December.
Glenn Tullett | Senior Business Development manager – Spain | Foreign Currency Direct