USD

Currency Market Update: British Pound Falters, Euro Wobbles, and U.S. Dollar Steadies Ahead of Key Data

Posted on by Will R

The British Pound continues to struggle, failing to build momentum despite modest gains in recent trading. Market sentiment remains cautious, with many investors convinced that the Bank of England (BoE) may soon accelerate its rate-cutting cycle. As the UK data calendar stays light for now, all eyes are on the upcoming Bank of England Monetary Policy Report Hearings scheduled for tomorrow, followed by the release of critical GDP figures on Friday. Both events are expected to shape the BoE’s direction and could lead to further volatility for the Pound.

Meanwhile, the Euro faced challenges during yesterday’s session, wobbling due to a lack of new economic data across the European Union. The single currency has lost over 2% against the U.S. Dollar since hitting a multi-year peak in late September. With the European Central Bank (ECB) expected to announce another rate decision next week, traders are in a wait-and-see mode. The economic calendar remains quiet until then, but the market is keeping a close watch on the ECB’s policy direction as it navigates the bloc’s economic landscape.

The U.S. Dollar remained relatively stable in Asian trading, holding near a seven-week high reached earlier this week. Traders are eagerly awaiting the release of the Federal Reserve’s September meeting minutes, expected later today. These minutes will provide deeper insights into the Fed’s decision to cut rates by 50 basis points and may hint at the central bank’s future plans. Additionally, this week’s inflation data will likely play a key role in shaping the Fed’s economic outlook, influencing investor sentiment in the coming days.

As the currency market looks ahead to pivotal data and central bank actions, traders and investors are bracing for potential shifts in the forex landscape. Keep an eye on these developments as they unfold throughout the week.

Currency Market Update: British Pound Hits 29-Month High, Euro Struggles, and U.S. Dollar Gains Interest

Posted on by Will R

The British Pound (GBP) has rallied to a 29-month high against the Euro, bolstered by expectations that the Bank of England’s (BoE) approach to easing monetary policy will be more measured compared to other G7 central banks. The prevailing sentiment is that the BoE will only cut interest rates one more time by 25 basis points before the year ends, providing a strong foundation for the pound’s continued growth. This slow and steady approach to policy adjustment has helped the GBP maintain its strength in the face of global economic uncertainty.

Meanwhile, the Euro (EUR) has been struggling to gain traction. Investors have taken a cautious approach, holding back on placing significant bets ahead of today’s release of Eurozone inflation data. The report is expected to reveal that inflation in the Eurozone fell below the European Central Bank’s (ECB) 2% target for September. If the inflation data is softer than expected, it will likely reinforce market expectations of a 25-basis-point rate cut at the ECB’s next policy meeting in October.

Across the Atlantic, the U.S. Dollar (USD) has been showing renewed strength following a more hawkish tone from Federal Reserve Chair Jerome Powell. During a speech, Powell indicated that he anticipates two additional 25-basis-point rate cuts this year, assuming the economy continues to perform as expected. Investors quickly reacted, adjusting their expectations and reducing bets on more aggressive easing by the Fed. This shift in sentiment has sparked interest in the USD, further stabilizing its position in the global market.

Overall, the currency market remains dynamic as central banks across major economies continue to navigate their monetary policies amidst evolving economic conditions. Keep an eye on upcoming data releases and policy meetings, as these will play a crucial role in shaping the direction of the GBP, EUR, and USD in the months ahead.

Currency Market Update: British Pound, Euro, and U.S. Dollar Performance

Posted on by Will R

The global currency market continues to reflect the economic conditions of major economies, with the British Pound, Euro, and U.S. Dollar all showing movement based on recent data releases and central bank actions.

British Pound Holds Steady Despite Mixed UK Services PMI

The British Pound remained relatively subdued during yesterday’s trading session following the release of the UK’s services PMI. While the growth in the UK’s key services sector was more modest than expected, the index still pointed to underlying strength. This helped limit the Pound’s losses, as the data suggested moderate growth overall, offering some stability to the currency in the face of economic uncertainty.

Euro Struggles as German Business Activity Contracts

The Euro faced additional losses yesterday after data revealed a significant contraction in German business activity. The September figures showed that business activity in Europe’s largest economy declined at its sharpest pace in seven months, raising concerns that Germany may have slipped into recession. The growing signs of economic weakness could increase the likelihood of another rate cut by the European Central Bank (ECB) in October, which would put further pressure on the Euro.

U.S. Dollar Rebounds After Fed Rate Cut

The U.S. Dollar has bounced back somewhat after the Federal Reserve’s significant rate cut last week, as investors appear less concerned about the risk of a U.S. recession. While the Fed’s easing cycle initially caused a selloff, investor sentiment has improved, and market participants are now pricing in 75 basis points of further rate cuts by the end of the year, with nearly 200 basis points in cuts anticipated by December 2025. This outlook has helped the Dollar recover, signaling a more optimistic view of the U.S. economy moving forward.

As global economic data continues to unfold, the currency market remains highly sensitive to shifts in growth, central bank actions, and investor sentiment. With the British Pound showing resilience, the Euro facing headwinds, and the U.S. Dollar in recovery mode, traders and businesses alike will be watching these developments closely to gauge future currency movements.

Currency Market Update: British Pound, Euro, and U.S. Dollar Movement

Posted on by Will R

In a dynamic global market, currencies are always on the move, and recent developments have put the British Pound, Euro, and U.S. Dollar in the spotlight.

British Pound Edges Up as Investors Await BoE Decision

The British Pound saw a slight rise during yesterday’s session as anticipation builds ahead of Thursday’s Bank of England (BoE) policy meeting. After a 25-basis point (bp) reduction in August, the BoE is expected to maintain its key interest rate at 5%. This decision could mark a pause in the easing cycle as investors closely monitor the central bank’s stance on inflation and economic growth. In the absence of significant UK economic data, the Pound’s movement may remain linked to broader market sentiment, with all eyes on Thursday’s rate decision.

Euro Consolidates Following ECB Rate Cut

The Euro seems to be consolidating its recent gains after last week’s European Central Bank (ECB) rate cut. ECB President Christine Lagarde recently cooled expectations for another rate cut in the near future. She emphasized that the central bank will make decisions on a meeting-by-meeting basis, without pre-commitments, leaving the door open for adjustments depending on future economic data. This cautious approach is aimed at balancing inflation control while supporting economic recovery across the Eurozone.

U.S. Dollar Under Pressure as Rate Cut Looms

The U.S. Dollar faced downward pressure as expectations build for the Federal Reserve to cut interest rates by 50 basis points at tomorrow’s meeting. Investor sentiment is strongly pointing towards an easing cycle, with a 68% probability of a 50 bp cut and a 32% chance of a smaller 25 bp cut. The Federal Reserve’s anticipated rate cuts could accumulate to 100 basis points by the year’s end, as the central bank responds to signs of a slowing U.S. economy.

Looking Ahead: Market Sentiment and Central Bank Policies

As investors await key policy decisions from the Bank of England, European Central Bank, and Federal Reserve, the direction of major currencies like the British Pound, Euro, and U.S. Dollar will remain closely tied to central bank actions and market sentiment. With no major UK data releases expected before Thursday, the Pound’s performance may hinge on market speculation surrounding the BoE’s rate path. Similarly, the Euro and U.S. Dollar will be influenced by the evolving stance of their respective central banks as they navigate an uncertain global economic landscape.

Stay tuned as we follow these key events shaping the currency markets.

Market Update: Sterling, Euro, and U.S. Dollar Performance in Focus

Posted on by Will R

Yesterday, the British Pound traded without a clear directional bias, largely due to the absence of any significant UK economic data releases. This left the Pound vulnerable to prevailing negative risk sentiment throughout the day. However, today’s session started on a more promising note with the release of the UK’s latest jobs report. The data revealed a further decrease in unemployment for July, which helped offset concerns over a slowdown in wage growth during the same period. This balancing act between lower unemployment and softer wage increases has provided some stability for Sterling.

Meanwhile, the Euro experienced slight losses, primarily driven by its inverse relationship with the U.S. Dollar. Investors in the Eurozone remain cautious ahead of the European Central Bank’s (ECB) interest rate decision, expected later this week. In the background, confirmation that German inflation slowed significantly last month has added downward pressure on the Euro, acting as a potential headwind in today’s session.

Over in the U.S., the Dollar inched higher as traders look ahead to critical inflation data set to be released on Wednesday. Expectations are that the report will show a continued cooling of inflation through August, a development that could shape the Federal Reserve’s upcoming interest rate decision. With the Fed widely expected to cut rates by 25 basis points next week, this inflation reading will be a key factor in guiding market sentiment.

Stay tuned as these key events unfold, which are likely to impact the market in the days ahead, particularly with central bank decisions looming in both the Eurozone and the U.S.

Sterling Gains Momentum Despite Budget Warning

Posted on by Will R

The British Pound showed a notable increase in value during yesterday’s trading session. Despite a cautionary note from Prime Minister Keir Starmer that the government’s Autumn Budget would be “painful,” investors remained largely undeterred. The Pound’s recent upward movement appears to be bolstered by comments from Bank of England (BoE) Governor Andrew Bailey, who has tempered expectations for imminent interest rate cuts. With limited UK economic data available, the Pound is likely to maintain its positive trajectory as long as investor sentiment continues to adjust their rate cut forecasts.

Eurozone Woes as German Economy Falters

In contrast, the Euro experienced a subdued trading session following the release of Germany’s finalized GDP figures for the second quarter, along with the latest GFK consumer confidence index. Although the lackluster performance was anticipated, it has reignited concerns about the health of the Eurozone’s largest economy. As a result, EUR exchange rates have remained relatively flat, reflecting the ongoing apprehension about the Eurozone’s economic outlook.

U.S. Dollar Gains Amid Geopolitical Tensions

The U.S. Dollar saw modest gains yesterday, driven by increased safe haven demand amid escalating geopolitical tensions in the Middle East, Libya, and Ukraine. However, the Dollar’s gains were somewhat capped as investors remain focused on potential U.S. interest rate cuts. Federal Reserve Chair Jerome Powell’s recent Jackson Hole speech, which signaled the likelihood of such cuts, continues to shape market expectations.

Overall, while the British Pound benefits from easing rate cut expectations, the Euro faces challenges from weak economic indicators, and the U.S. Dollar’s advance is tempered by ongoing rate cut speculation.

Can the pound sustain its rally?

Posted on by Wordpress Admin

The markets finally woke up to the fact that the Federal Reserve will no longer bail the stock markets out with easy money after Jerome Powell’s speech last Tuesday.

Having constantly warned participants that the Federal Reserve was serious about rapidly increasing the cost of borrowing, the penny finally dropped, and Wall Street led the rest of the world’s stock markets sharply lower. The falls initially had the impact of pushing the dollar higher, but by the end of the week, the money leaving riskier assets sought the safe haven of US bonds and yields eased. As yields eased and fears of a recession grew, the dollar pulled back. Sterling had an eventful week with what some saw as an MOT of financial data for the UK economy published. The figures revealed that the jobless rate is at its lowest level for nearly 50  years; however, wages are rising to add to fears of an income spiral that will fuel already high inflation. Price rises were a smidgen easier than forecast whilst consumer confidence was much lower. At least the great UK shopper is doing their bit, helping Retail Sales be more robust than expected!

This week the UK has a well-deserved rest from being the centre of attention for economic data, but the pound may well stay at the forefront of traders’ minds. After a good bounce last week, the momentum has continued this morning. However, Boris Johnson is not entirely out of the woods over partygate despite avoiding the embarrassment of a further fixed penalty notice for Covid lockdown breeches. The long-awaited Sue Gray report will be published this week and may embarrass him and the government further. The ongoing problems with the Northern Ireland Protocol are also starting to worry the markets, and with a trade war threatened, sterling may begin to lose some of its newfound shine. The key events in the coming days look to be centred around US data and the minutes from the last Federal Reserve meeting. With volatility still at heightened levels, it seems sure to be yet another week where we witness larger and more unpredictable currency movement than usual.

GBP: A wild week for sterling ended with it rallying strongly, which it has continued to do this morning. It is now over three cents better against the dollar and nearly a cent better against the euro than a week ago. With the economic data released last week pointing toward a period of stagflation and potential political upheavals in the background, it is somewhat surprising that sterling has performed so well. It may be explained by traders and investors being overly short of the pound, as was evidenced by figures released for the derivative markets last Monday. The statistics revealed that traders such as hedge funds were unusually four times shorter of sterling than they were long. The only significant data releases are the preliminary Purchasing Managers Indexes for Manufacturing and Services tomorrow morning. The services element will be the most closely studied, with consumer confidence collapsing as the cost-of-living crisis takes hold.

EUR: Last week, the euro dragged itself off the floor after more hawkish than expected minutes from the last European Central Bank meeting were published. The single currency was also helped higher by statements from ECB council members, the most noteworthy comments coming over the weekend from Christine Lagarde, who said the first rise in rates for over ten years might come in July. Earlier in the week, Klaas Knot had said that a .5% rise was not out of the question, although that still seems unlikely. During the week ahead, there will be plenty of opportunities for policymakers from the ECB to air their views starting tomorrow with Christine Lagarde again. On Wednesday, Fabio Panetta, Klaas Knott and Phillip Lane are all slated to take the microphone. This week is relatively light on the data front, the highlight being the Purchasing Manager’s (PMI) reports on Tuesday. Last month’s figures beat expectations, especially in the services sector. With consumers worldwide pulling their belts in the Service PMI will be watched closely to see whether the same is happening in the EU as Summer approaches. Much of Europe celebrates Ascension Day on Thursday, a public holiday, most notably in France and Germany. This morning as this note lands in your inbox Ifo will release its surveys on German business conditions, which are expected to have worsened slightly over the last month.

USD: Just as it looked impregnable, the mighty dollar backed down last week as fears over an impending recession took hold in the US. Wall Street and the stock markets finally realised that the Federal Reserve will not come to investors’ rescue until inflation is out of the system. As the attractions of holding riskier assets, such as shares, waned, the appeal of government bonds increased, forcing yields lower, making the dollar less attractive. This week, the only significant data releases for the G3 currencies are in the US. The data week starts tomorrow with preliminary Purchasing Managers Indexes and New Home Sales released. Durable Goods orders are scheduled for Wednesday, First Quarter Gross Domestic Product (second estimate), and the weekly jobs data are on Thursday. On Friday, the Federal Reserve’s favoured measure of inflation, the Personal Income and Spending report, including the core Personal Consumer Expenditure deflator, is published. Also scheduled are the minutes from the last FOMC meeting, which will almost certainly confirm the prospect of two .5% rate increases at the June and July meetings. There are plenty of speakers from the Fed who are expected to carry on with their hawkish rhetoric starting this afternoon with Raphael Bostic; tomorrow, it’s Jerome Powell’s turn, and on Friday, possibly the most prominent hawk at the Fed, James Bullard.

The dollar continues to climb

Posted on by Wordpress Admin

Central Banks and their policy choices once again dominated the currency markets last week and will continue to do so as we edge closer to their next meetings.

With interest rates set to rise worldwide, speculation is rife on the quantum of the rises. The most aggressive stance is still being taken by the US Federal Reserve, which continues to say nothing to dissuade investors from anticipating successive increases of 0.5% at their next two meetings and, if some analysts are to be believed, possibly by more. The derivative markets are now pricing in no less than nine back-to-back rises of at least 0.25%. In contrast, the Bank of England is sounding almost dovish, and in the face of gathering problems for the UK economy, this may be prudent. Last but by no means least, even the European Central Bank is now hoping to raise rates by 0.75% by the end of the summer.

The euro initially bounced before giving back most of its gains on the news that Emmanuel Macron was comfortably re-elected on Sunday after gaining nearly 58% of the vote in the Presidential Election. With the French Presidential elections settled, a European embargo on Russian oil is more likely, which will cap any advance by the single currency. The week head is bereft of important economic data until the end of the week when inflation in the eurozone and GDP in the US is released. With a dearth of financial data, speculation over the war in Ukraine will play a more significant role in the markets, and the euro will be on the frontline as it feels the impact of slowing economies, dropping consumer confidence, and rising energy costs. Also fighting for attention will be the bond markets which, after a week of rising yields, may continue to undermine confidence in the equity markets, which could lead to a further search for safe-haven assets. All in all, a challenging week ahead for the euro and the pound was possibly made worse with month-end volatility exaggerating movements.

GBP
Friday’s poor set of retail sales data combined with falling consumer confidence was taken badly by currency traders who pushed sterling sharply lower against the euro and the dollar. It has started the week still on the back foot, having lost nearly two cents over the last seven days and is now sitting near its lowest levels against the dollar for 18 months. On reflection, the hesitancy of Andrew Bailey to be hawkish is understandable; however, the market still sees at least a 0.25% rise in base rate after next week’s meeting of the Bank of England’s Monetary Policy Committee. Whether the appetite is still there to increase the base rate by 0.5% is now open to debate, and this doubt has encouraged the recent sellers. Sterling’s sharp fall will also put pressure on the Bank of England as there is now a danger of importing inflation through a weakened exchange rate. Unusually it’s a barren week for macroeconomic data in the UK, which may not be necessarily a good thing. Attention may turn to Boris Johnson’s problems and his seemingly constant battle to stay as Prime Minister. Campaigning for the local elections, which take place on the same day as the Bank of England meets, will also start to hit the headlines, so we could be in for a nervy week politically, which may feed through to sterling. Tomorrow Sam Woods from the Bank of England is scheduled to speak, and his colleague Sarah Breeden will take to the rostrum on Thursday.

EUR
Despite President Macron winning a second term, the euro is still hovering around its lowest level for two years against the dollar. With the Federal Reserve set on raising the cost of borrowing next week and risk aversion continuing, the euro is likely to stay on the back foot for the time being. This week, investors in the euro can turn their attention back to raw macroeconomic data and the problems the European Central Bank faces. The problem for the ECB is how to start normalising policy and when to start doing so. This was brought into focus on Friday with ISMs Purchasing Manager’s Indexes release. During April, the services sector in the eurozone touched a seven-month high; however, manufacturing PMIs appear to be grinding to a halt. With manufacturing stuttering and inflation growing, it does appear that the eurozone is heading into a period of stagflation. The eurozone has the busiest data docket of all the major currencies this week, starting this morning with the release of the IFO Business sentiment reports for Germany, followed by EU Construction Output. We then have a couple of days without top tier data before Germany releases its preliminary Consumer Price Index and Eurostat publishes a plethora of data, the most important being Consumer and Industrial Confidence. A busy week closes with  German and eurozone GDP and the EU Consumer Price Index. The only speakers due from the European Central Bank are Fabio Panetta this evening and Luis de Guindos on Thursday afternoon.

USD
The Federal Reserve looks nailed on to raise rates in a little over a week, by 0.5% and even if some are to be believed, 0.75%. This should continue to support the dollar, especially against currencies with more circumspect central banks. The prospect of the rise is causing risk assets to come under pressure in particular stock markets, which in turn is strengthening the greenback. A quiet start to the week on the data front is in prospect until Thursday when Gross Domestic Product is released, which is expected to have slowed from the last quarter as Omicron damaged the economy. However, if recent data is believed, this is a blip, and the second quarter GDP should bounce back strongly. Friday sees the release of Personal Consumption Income and Spending, including the April Index, which the Fed will be watching closely. Before that, Durable Goods are released tomorrow, and of course, the weekly jobs data is out on Thursday. There are no speakers from the Federal Reserve this week as they are in their normal blackout period ahead of their monthly meeting on 4th May.

Financial markets get the jitters

Posted on by Wordpress Admin

A relatively quiet week sparked into life last Thursday afternoon after the release of a slightly higher than expected Consumer Price Index from the US. At 7.5%, the index is at its highest level for over four decades, and worryingly the core figure is also rising steadily.

In response, yields on US bonds rose sharply, as did interest rate projections in the derivative markets. James Bullard, from the St. Louis Federal Reserve, reacted by suggesting that the cost of borrowing should rise by 1% between now and July and even suggested that the Federal Reserve could hold an emergency meeting and raise rates. This reaction smelt slightly of panic to the markets, and as would be expected, stock markets started to slide, pushing the dollar higher as investors searched for safer assets. Sterling fared better than the euro as expectations are that the Bank of England will again raise rates in March whilst the European Central Bank council members started to dial back their hawkishness.

With a quiet week ahead, at least for economic data, elsewhere attention will switch to the UK this week. With the next meeting of the Bank of England looming, the release of the UK’s inflation indexes this coming Wednesday will be studied with interest. With the increases in energy prices starting to come through into the numbers, expectations are for another jump. Elsewhere geopolitics will continue to unsettle the markets, with President Putin becoming increasingly belligerent over his intentions towards Ukraine whilst President Biden back peddles. Over the weekend tensions escalated with countries, including the UK, advising its citizens to leave Ukraine as fears of a Russian invasion grew. Elsewhere Brexit negotiations still rumble on, as do Boris Johnson’s domestic problems; however, a quieter week on that front with parliament on recess may be on the cards.

GBP
After last weeks inflation shock in the US, the UK takes centre stage this week with the release of both employment and inflation data. First up is the unemployment data, released tomorrow, which is expected to edge lower again to virtually pre virus levels. With markets now expecting further moves upwards in Base Rate at the Bank of England’s next meeting followed by another one in May Wednesday’s Consumer Price Index will be of some importance. Most analysts are looking for a slight drop in January’s headline figure but for it to bounce back and peak in April. If there is no apparent easing in the figure sterling could make further gains in particular against the euro. Also scheduled for release, but not quite as important as the CPI figure, are January’s Retail Sales which are published on Friday.

EUR
The euro was buffeted by the storms that crossed the Atlantic following the release of the US Consumer Price Index and the responses from the mouthpieces of the Federal Reserve. Christine Lagarde’s attempts to soften her hawkish rhetoric of the previous week unsettled the markets, as did the hawkish comments from the new President of the Bundesbank, which highlighted the frictions inherent in the European Central Bank’s council. Contradictory speeches were also delivered by Phillip Lane and Isabel Schnabel leaving the ECB in a catch 22 situation. As well as its internal problems, investors are also nervous about European assets as the temperature continues to rise between NATO and Russia on Europe’s Eastern border, keeping a lid on any advances by the euro. The only data of note due this week was out tomorrow when Employment and Gross Domestic Product for the Eurozone published and the ZEW sentiment surveys for the zone and its constituent countries. However, there are some notable speakers who will have a chance to give more clarity to the ECB’s position. The first opportunity falls to Christine Lagarde today and then Isabel Schnabel has a chance to reiterate her hawkish credentials and Phillip Lane his dovish ones on Thursday.

USD
With minimal top tier data release out of the US this week, the dollar’s direction is likely to be driven by the continuing fall out from last week’s Consumer Price Index. Financial markets are looking for now looking for a rise in rates at the next Federal Reserve meeting on 16th March. The derivative markets are suggesting that there is a better than 50/50 chance of a .5% rise to be followed by at least another four hikes through the rest of the year. However, there is another set of inflation figures released before that meeting and the markets and consequently, the dollar may have got ahead of itself. On Wednesday Retail Sales will be watched for any further signs of weakness that they have shown recently but with the effects of the Omicron variant still evident, some softness may be expected in them.  The only other top tier figures scheduled for release are for Industrial Production, also on Wednesday, and the weekly jobless total on Thursday. Away from data, the market will be studying the minutes from the last FOMC meeting, which are released on Wednesday evening, to see how concerned the Fed really is over inflation.

Scandinavia
Despite a somewhat hawkish Riksbank, the market expected even stronger language from Governor Ingves making the Swedish krona weaken further. It reached levels last seen in early 2020 on Thursday. Focus this week will be on the situation in Ukraine as any talk about military action could potentially have a negative impact on beta currencies such as the krona. On Friday, the latest CPI figures are released and will be closely monitored by market participants. Over in Norway, the country is preparing for ex-Prime Minister and current Head of NATO, Jens Stoltenberg to take over the helm at Norges Bank. Given the previous political affiliation of Herr Stoltenberg, some questions have been raised in regards to his fitness for the role. This week the latest GDP figure is released on Wednesday.

Will dollar continue to dominate?

Posted on by Wordpress Admin

Last week the markets were dominated by the strength of the US dollar, which took sterling down to nearly three cents off September’s highest level, with the euro also giving up a similar amount.

Dollar dominates

Flows into the dollar were encouraged by the rise in yields on US treasuries and it’s safe-haven appeal as equity markets came under pressure. Much of the move was caused by the quarter-end rebalancing of portfolios, which created more volatility across all asset classes than has been the case recently. The dollar was also pushed higher as currency derivative traders in the options market were caught out by the speed of the moves and had to rapidly hedge positions.

The market enters the fourth quarter of the year in a suitably nervous mood. Many brokers will remember the stormy weather and equally turbulent markets that led to the stock market crash in October 1987. This month tends to be tricky for equities, and with the world’s financial markets intertwined, the currency markets can also be volatile. Policy tightening in the US now looks imminent, possibly as soon as November if this week’s employment data is reasonably strong.

Also of interest will be the outcome of today’s OPEC+ meeting. With global energy supply problems, threatening to push inflation higher, traders will be keeping an eye on whether they turn on the metaphorical taps. Finally, as always, politics will play out in the background both in Germany and closer to home, where an under pressure Conservative Party will hold its annual conference.

UK

Worries early last week over the possibilities of 1970’s stagflation reappearing in the UK combined with quarter-end pressures and pushed sterling sharply lower against the dollar. It recovered some ground during the week but remains at the mercy of King dollar. It fared better against the euro ending the week unchanged. With The Governor of the Bank of England hinting at a rate rise before the end of 2021 and the money markets looking for three rate hikes next year, sterling should continue to hold its ground against the single currency and possibly grind higher. This is not to say that there are no problems on the horizon for sterling. Energy supplies are causing concern due to a lack of storage facilities for natural gas and, almost unbelievably after last weekend’s weather, a lack of wind to turn turbines. The Conservative Party conference takes place this week, and this may present the government an opportunity to put their case over Northern Ireland and trigger article 16. Macroeconomic data is pretty thin on the ground, with only September’s final Composite Purchasing Manager’s Index (PMI) released tomorrow, which may just have fallen back from August’s 54.1. The Bank of England is scheduled to release its Quarterly Report on Friday, and the Bank of England’s hawkish Dave Ramsden speaks on Tuesday.

EUR

The euro had a tough week dropping quite sharply against the dollar, which was no surprise considering the European Central Bank’s (ECB) dovish stance over inflation. It was also damaged by the risk-off mood permeating the markets. Whether the ECB is still relaxed over inflationary pressures after September’s headline figure touched 3.4% will become apparent with speeches scheduled this week from Christine Lagarde and Phillip Lane, both of whom are doves. As discussed last week, the horse-trading over who will lead Germany is now in full flow and looks set to continue for several months to come with a Green/Socialist coalition looking the most likely outcome. Tomorrow Eurostat will publish Europe’s Producer Price Index, and Markit will release their Composite PMIs for the Eurozone and the countries that constitute it. On Wednesday, the EU’s Retail Sales are reported; this Thursday, Germany will release their Industrial Production data, and the ECB will publish the minutes of its most recent meeting.

US

Moves in the stock market and risk sentiment are likely to be the dominating factor at the start of the week as we wait for the latest employment statistics from the US Labor Department on Friday. Despite China remaining shut all week for holidays, the market’s worries over Evergrande are still bubbling under the surface, and equities may be volatile again. With speakers from the Fed starting to sound concerned over inflation, the stage looks set for a start to a tapering of QE next month.

If Friday’s Non-Farm Payroll shows new jobs in the region of 500,000, the market will take this as a virtual confirmation that policy will change sooner rather than later. Although now possibly in overbought territory, the dollar should continue to stay in favour as it continues to benefit from what is called the dollar smile. The smile reflects the dollar’s direction; one side points up when yields rise due to a strong economy, and the other side points up when the markets become risk-averse. By the end of the week, we will know if the dollar is grinning or grimacing.

The data week starts tomorrow when Markit releases its composite PMI and ISM publishes its Services PMI. The first of this week’s three employment reports are published on Wednesday, the ADP white-collar numbers, which will be watched more closely than usual for clues to Friday’s data. These are followed on Thursday with the weekly jobs number and finally, the big one, Friday’s Non-Farm Payroll.

Scandi

The Swedish Krona had a relatively quiet end to the quarter and remained stuck within the range it has been trading for most of 2021. The fourth quarter has historically been a krona positive month, and most market participants expect this quarter to be no exception. This week we will get the latest Industrial Order and the Household Consumption figures. Both are expected to show an expansion.

In Norway, the krone finished the month on a strong note and is at its highest level against the euro for the year but for a brief spell in April. The ever-increasing demand for oil and general shortages are certainly assisting, but the fact that Norges Bank raised interest rates should not be overlooked. This week we will get the GDP figure on Friday. The economy is expected to have grown 0.9%, an increase of 0.4% compared to last year.