This Week's Financial Reports May Cause Forex Movement
Last week saw Brexit concerns weigh on sterling, with an official date being set for the referendum. Cable (GBP/USD) finished the week near a 7-year low, below $1.39. EUR/GBP traded up around 79p for the first time since end 2014.
Dollar-wise, an improvement in risk appetite (equities up c.2%) and some recovery in oil prices coincided with a firmer tone to the currency. Positive US macro data (incl. consumption, core PCE and Q4 GDP) also benefited the dollar. The EUR/USD pair finished the week around the mid-point of the $1.09-1.10 range.
This week, some of the focus may shift back to underlying data, with key labour market metrics due in the US. Non-farm payroll are expected to record another strong result (+193k), while the unemployment rate should hold at an eight year low of 4.9%. Average earnings, which rose strongly in January, are anticipated to pick up again. The data could help to provide some encouragement to the Fed with regard to the US economic outlook. Thus, they could provide a further boost to the dollar.
In the Eurozone, flash HICP (February) and unemployment (January) will garner significant attention ahead of next week’s ECB policy meeting. Inflation is forecast to fall back to 0%. Unemployment will remain elevated. Therefore, the data look set to support expectations that the ECB will ease policy further this month, meaning we may see the euro come under some downward pressure.
For the UK, PMI data for February is the only release of note. They are expected to point to a slight slowdown in growth. Overall, Brexit related uncertainty could continue to weigh on sterling in the coming days.
Communications spotlight fall on ECB officials
This week, top officials at the European Central Bank will hold speeches at frankfurt and Brussels. ECB governing council members will be cognisant of the fact that in December there was a clear difference between what the market and the central bank were expecting regarding expanding the ECB's stimulus package. It is believed that the governing council members will be aware of how the markets will react to any signals of action or in-action.
It is unknown what the main officials will reference however one key factor will be continued low inflation. European inflation missed expectations as it came in at minus 0.2% and core inflation was at 0.7%, well below January's figure of 1%.
UK Fourth Quarter Growth Confirmed At 0.5%
The Office of National Statistics released an updated report which confirmed that British economic growth was at 0.5% for the fourth quarter of 2015. Overall, the annualised result came in at 2.2%.
While the UK economy is one of the fastest growing economies within the developed world. It still remains unbalanced as the manufacturing industry which includes energy receded by 0.5%. Both the services sector and consumer spending increased by 0.7% respectively.
Chris Williamson, an economist at Markit supported the unbalanced economy claim stating that the economy is ‘dependent on consumer spending’. You can read more on the British economy on the BBC website.
Will the Aussie Get a lift from Central Bank’s Mad March
This month, we will have the European Central Bank meeting (10 June), the Federal Reserve and Bank of England both on 17th March. At the end of the month it could mean that the Aussie may be higher than the 71 cents mark it currently stands at against the US Dollar.
If this was to happen, it may force the Reserve Bank of Australia to cut interest rates to keep the Aussie in check. Currently this is priced on the market at a 6% chance that the central bank will lower interest rate by 25 basis points. Only time will tell starting Thursday week which could set a precedent, especially if the ECB modify its current quantitative easing programme.
New Zealand Will Increase The Minimum Wage
New Zealand will increase the minimum wage to $15.25 from $14.75, which is a 3.4% rise. Unfortunately for the government, lobbyist were not happy as they pointed out that it took seven years to get this level after workers campaigned for a $15 dollar minimum rate in 2009.
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