What is driving the markets today? Getting the best deal on your foreign exchange (Mike Vaughan)

Pound to Dollar forecast: Sterling continues to decline against the US Dollar

Will the ECB cut rates?

With the pound having lost value in excess of 2% against the Euro recently, those clients looking to secure funds in excess of 1.21 and beyond have had somewhat of a shock in the last week. For me I feel this dip is temporary and some of the softer data sets from the UK may be as a direct result of the recent adverse weather conditions in the UK and it will be interesting to see what impact this will have on official GDP data at the end of the month.

Looking at data sets to watch out for in the coming week, yesterday’s ECB monthly report indicated that the latest ECB projections, now covering the period up to the end of 2016, support earlier expectations of a prolonged period of low inflation, with levels forecast to naturally closer to the banks 2% target. However should the levels of inflation remain low, and certainly below the current 0.8% then Draghi may have no option but to look at cutting interest rates to combat deflationary pressures, this is something that is likely to keep pressure on the Euro.

For me the next major impact for this pair, particularly from the pounds point of view, will be next Wednesday’s Bank of England minutes. This will give a full review of the latest interest rate meeting from the Bank of England’s MPC and clues as to when they may consider raising interest rates. Any hint towards this and it could prove a positive morning for the pound.

Also watch out for tomorrow’s trade balance figures for the UK.. Expectation is for -£8.7bn, any improvement on this and this could lend support to the pound. Figures are released at 09:30.

US dollar

Recently cable (GBP/USD) has seen a slight move in favour of the dollar pushing back into the 1.65s for the first time in over a month, is this the start of a reversal in fortunes for the dollar?

Today’s retail sales figures came in at a positive 0.3% slightly improved from the forecast of 0.2% and way up on last month’s -0.6% figure. As a result the dollar has weakened, a surprise based on this release, and it would appear the moves have come as investors pulling out of the dollar and are looking at riskier currencies such as the Aussie and Kiwi.

Tomorrow is relatively quiet for the dollar with PPI inflation figures at 12:30, with the next major data release Wednesday next week being the FED interest rate decision and accompanying statement.

AUD/NZD

Sterling’s unpredictable run against these currencies continued today as the pound posted losses in excess of 0.5% against both. Moves came following strong employment figures on Wednesday night and still appear to be benefiting from increased risk appetite from investors following the ECB’s reluctance to cut interest rates to ease deflationary pressures in Europe.

This move has been even more surprising considering the softer data from China with industrial production falling from 9.5% to 8.6% and retails sales down from 13.5% to 11.8%, with the Australian economy heavily reliant on Chinese demand for their raw materials poor data like this would usually cause a large sell off for these currencies again highlighting how unpredictable this current market is.

To run through current market trends and to see what we can offer your for your pending currency transfer please email me with a brief overview of your requirement and I will contact you to run the through the currency service we provide. Please email Mike at [email protected]