Pound and Dollar Set For A Busy Week
We are starting the week with the Pound in a weaker position against the Euro, having fallen to 1.17 from 1.18 at the start of last week. Many clients have been surprised that this is the case as overall sentiment about Europe and the future of the Euro is fairly negative with the latest problems being the issues of the break-up of the coalition majority in Ireland over the weekend as the Green Party removed their support. Currency markets however really do work on a day by day (even minute by minute) basis using the economic calendar of data releases to really steer where investor’s funds are moved to, and subsequently which currencies strengthen. In economic terms, last week saw more successful bond auctions in the Euro-zone shoring up confidence about the ability of cash-strapped nations to raise funds and there have been other positive announcements such as increasing business confidence in France and Germany. The Irish situation could of course create downwards pressure for the Euro should it emerge that there will be a definite problem with the implementation of the European bailout package being dependent on an overall Government majority to pass all the required measures. Other than this, it will predominantly be the Pound and the US Dollar in the spotlight this week. Tuesday sees UK GDP figures which tend to be quite significant in terms of Sterling coming in for the fourth quarter of 2010. There are some concerns that GDP could edge lower than official forecasts due to the impact of the winter weather which could be detrimental for the Pound on Tuesday. We also have the Bank of England minutes from the latest monetary policy committee meeting on Wednesday which markets will analyse in detail as to any clues about when the rise in interest rates might be. In the US, GDP figures are also due, but on Friday. Some economists have given predictions that it could be a good week for the Dollar with consumer confidence, consumer spending and GDP expected to show growth. The next interest rate decision is also due from the Federal Reserve but with rates expected to stay the same the build up of data throughout the week may be what is significant in terms of rate movements.