Monday, 14 March 2016

Monday, 14 March 2016

UK budget announcement one of three key releases this week

Last week was a particularly volatile one with the EU referendum in the UK giving way to the European Central Bank announcement as the major headline. We had seen an extension to the European Quantitative Easing Programme and cut to their deposit rate priced in for the last two weeks, but a surprise reduction in the base interest rate to zero caused a quick sell off in the single currency on Thursday.

The euro weakened to 1.3064 against Sterling, the highest level since the start of February, before then retreating back down towards 1.27 as the markets digested the speech from Mario Draghi. The same thing happened in December when they last extended their stimulus package as investors saw it as a positive for the single currency. The rate fell 2.5% from the peak Thursday PM and meant that a EUR 250,000 purchase was suddenly nearly £5,000 more expensive just 18 hours later.

GBP/EUR exchange rate graph

We could be in for more of the same this week with some huge announcements to come. Wednesday looks to be the busiest day with UK unemployment figures to be released at 09:30, before Chancellor George Osbourne delivers his Budget Statement at 12:30. The budget can cause swings in Sterling crosses as the Chancellor has to manage cuts to public spending in order to reduce our deficit, without restricting growth. I would also expect to hear comments from him during his speech with regards to the EU referendum, with him backing the “Remain” campaign, and how it could impact outlook for UK growth.

The final major event this week is the Bank of England interest rate decision Thursday, now that they have changed the release to every 6 weeks to coincide with their US counterparts. Again we don’t expect any change in the interest rate, or the split in votes, but any comments in the summary and minutes could affect the pound. This follows Eurozone inflation data which caused a drop in the euro last week so it looks like Wednesday and Thursday could be busy days on the FX markets.

Get in touch

With the referendum approaching and never seemingly out of the headlines, plus the economic announcements due this week, it is just as important as ever to keep in touch with your Foremost Currency Group broker. If you don’t have a contact at Foremost Currency Group please get in touch so that we can run through the options available and put a plan together to try and maximise your currency purchase – quote PE/Allez-Français
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