Thursday, 14 May 2015

Thursday, 14 May 2015

Currency update - a lesson in the importance of timing

Yesterday was particularly volatile for three of the major currencies. Sterling, Euro, and the Greenback all had major shifts throughout the course of the London session as a number of different economic data releases and announcements impacted the FX market.

What Happened with the Pound?

Sterling pairs saw a game of two halves yesterday. It looked as though the pound was going to be one of the major winners after the release of UK employment figures which saw a meaningful decline in the Claimant Count and Unemployment remain at 5.5%. It was not to last unfortunately for those holding Sterling. Carney, during the Quarterly Inflation Report, cut the Bank of England’s growth forecast to 2.5% for the year and suggested that the long-awaited interest rate hike may not happen until Q2 2016.

Sterling quickly erased its gains and ended up dropping the best part of two cents against the euro before the day’s end. Much of the pound’s recent rise has been due to speculation over a 2015 rate hike in the UK. Weaker growth prospects and rock bottom inflation further distance the possibility and market participants were quick to adjust to the news.

Why Did the Dollar Decline?

The dollar too suffered a difficult day against its counterparts as the Greenback continued to slide. The catalyst yesterday was the US Retail Sales figures which missed analysts’ estimates. The dollar’s rise has also been a by-product of speculation over a coming rate rise. The Fed had suggested the beginning of Q3 or Q4 as potential dates; however, with weaker data becoming more the rule than the exception, the Fed may have to hold tight again.

What Caused the Euro’s Strength

The euro had a better showing yesterday despite weaker GDP figures from its leading economy. Germany was expected to produce 0.5% growth but only managed 0.3%. The French were uncharacteristically smug yesterday morning after they managed to grow by 0.6%- all those bank holidays must be good for something after all! The main reason for the increase in EUR pairs was due to the weaker US figures. Whilst it might seem tenuous the Greenback is largely measured against the euro and the dollar’s movements tend have an impact on the value of the Single Currency as the graphs shown attest.

So What Does This Mean for You?

In short yesterday was a stark lesson in the importance of timing. The difference in price for a €200,000 property yesterday, between the highs and lows, was £2,500- which is a lot of wine and cheese to enjoy on one of the many French bank holidays!

Keep in touch with Allez-Français via this blog to keep abreast of all the relevant news and data that can help build your budget and add value to your currency trade.

Today’s Announcements

Today is relatively light on economic releases as, surprise surprise, there are bank holidays in France and Germany.Back in the world of the working there are no economic releases of note from the UK and the US are due to issue readings of PPI and their Initial Jobless Claims numbers.

Guest writer : Adam Bobroff, Director

Tel +44 (0) 1442 892060
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