Friday, November 22, 2019
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Will sterling continue to weaken?

Sterling continued its losing run suffering a poor day on Friday, with a large portion of the gains made on Thursday against the euro being erased.
The UK currency performed marginally better against the US dollar, but still found itself losing ground following the recent statement from the US Federal Open Market Committee (FOMC), which inspired optimism for the US economy.
This week sees key inflation data from the UK released on Tuesday in the form of the consumer price index.
This is seen as the most important inflation data for the UK, as it is used as the Bank of England (BoE)’s key inflation target.
Increased inflation could put pressure on the BoE to hasten interest rate increases but the expectation is for a reduction to 1.7 percent for February from the January figure of 1.9 percent, which are both below the target of 2 percent.
The release of retail sales data on Thursday is also a key event, given that it is the primary gauge of consumer spending for economists.
Retail sales are expected to have returned to growth in February having suffered an unexpected fall in January.
Any unexpected surprises in any of these figures could impact significantly on sterling.
Euro zone worries over the Ukraine may impact the euro
The euro finished off the week trading in a tight range against other currencies.
This was mainly due to the lack of significant data releases out of the euro zone on Friday.
Today we have the release of the flash manufacturing- and services purchasing manager indices for March for the Eurozone as a whole, as well as from France and Germany individually.
Any surprises here could also significantly impact the euro especially given the worries of what is happening in the Ukraine.
On Tuesday, we have the release of the German Business Climate Index and at the end of the week similar sentiment data for the whole of the Eurozone.

US Dollar in the ascendancy
The US dollar ended the week in muted fashion, but ultimately still finished stronger over the week as a whole.
The US currency saw its biggest weekly gain in two months as continued optimism drove the currency upwards following the revelation that interest rates could be raised sooner than expected.
This week, events don’t begin until tomorrow, when we will get consumer confidence and the new home sales data from stateside. Wednesday sees data on core durable goods orders, while Thursday has a number of points of interest. The main one will be from the labor market, with unemployment claims figures to be released.
Supporting this will mainly be the pending home sales figures, as well as a final growth figure. Lack of surprises on this front may mean a quiet week for the dollar.
Things quieten down on Friday, winding down the week.
We will, however, see minor releases such as the University of Michigan’s consumer sentiment data and personal spending figures — these may have the opportunity to impact the dollar.

Canadian data surprises to the upside
Inflation and data sales from Canada were anticipated by investors throughout the week and did not disappoint.
These provided a positive surprise, allowing the Canadian dollar to claw back some of the losses it experienced following Bank of Canada Governor Stephen Poloz’s statement that an interest rate cut was possible if the economy were to worsen.
Turkey’s courts decided to block the access to social media site Twitter on Friday, only days before elections. This was followed by rumors of a corruption scandal involving Prime Minister Tayyip Erdogan.
The currency market responded negatively to the lira given the instability. This week starts off seemingly calm with no major data releases.
We look forward to trade balance data from New Zealand on Wednesday, as well as interest rate decisions from Norway and South Africa on Thursday.
Investors will be keeping an eye on these results, which could affect the related currencies.

– Charles Purdy is director of Smart Currency Exchange, London.