Yesterday morning the pound saw some gains following the Chamber of Commerce forecast update. In it they raised the forecast of growth within the UK for both 2014 and 2015. They are normally the most “optimistic” forecasting institution and I personally am a little bit wary. We would only need to see a contraction from the US or China or an escalation in Eastern Europe between Russia and the Ukraine for global growth to be impacted. It does however fuel the forecast for the medium and long term trend for sterling to be positive against the majority of currencies.
Saying the above however rates of exchange will never move in a straight line and timing a trade will remain key to getting the best price. In the short term economic data releases and politician commentary drive the change in demand for currency and therefore its value.
Later today we see both Industrial and Manufacturing Productivity of the UK. These are expected to be positive and as a result push up the value of the pound. Be wary however that this may be the first data release impacted by the flooding in the UK so GBPEUR traders may want to move before 9:30 on the expectation avoiding the risk of the data missing expectations.
Following this the Bank of England is in front of the Government Select Committee. The main topic will be the recent compliance scandal but there is the potential for more information being given on the Forward Guidance policy. Changing forecasts on interest change within the UK and quite easily its price. Then to end the day we also have the latest GDP estimates from the NIESR this afternoon.
I personally expected either this morning or Wednesday morning to provide the best buying times this week with a drop on Thursday. I would however be surprised if we did not end the week higher than where we started yesterday.
Cable prices have continued to remain strong this year. The FED has over 80% of its “QE tapering” left to complete. This reduction in cheaper money into the market is having a large impact on developing countries who are now finding it more expensive to raise capital. The dollar has been the main loser so far and this is expected to continue through the year resulting in the trend remaining positive for the GBPUSD pairing.
The busiest days for the dollar this week are Thursday and Friday. US Retail figures are released on Thursday and Production Price Index and Consumer Sentiment figures on Friday. All of these are expected to show an improvement and could make the dollar more expensive to buy.
Over the weekend both China and Japan released stark warnings that their economies are slowing down which could impact both global growth forecasts and the price of the AUD and NZD. Japans economy expanded less than expected and their Account Deficit widened to a record level. China’s Trade Balance, Export Figures and Consumer Price Index all fell over the weekend. Both the AUD and NZD provide a lot of the raw materials used in these nations so the currencies are linked.
This evening the Reserve Bank of Australia release Consumer Confidence figures which is expected to show an improvement meaning GBPAUD may want to trade before this release today.
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