The pound trended broadly lower through June, the currency being primarily undermined by concerns over the UK’s economic trajectory.
Markets weren’t impressed to see that the week’s Eurozone inflation data missed forecasts on Monday and Tuesday. This was particularly bad timing given the European Central Bank (ECB) had said the week prior that it was prepared to expand the tapered quantitative easing programme should the economy weaken without the additional stimulus.
German consumer prices stagnated on the month, while Eurozone core consumer price growth slowed unexpectedly from 1.1% to 0.9%. This weighed on the euro, despite other data showing that the Eurozone unemployment rate had fallen below 9% for the first time in eight years.
The euro was on mixed form at the end of the week. Italian, Spanish and German manufacturing PMIs put in a strong showing, German unemployment fell by 1,000 people more-than-expected and the finalised Eurozone manufacturing index was confirmed to have hit an 80-month high in October. Still, unrest in Catalonia continued to provide a sticking point for markets and so EUR was left to react to strength or weakness in its major peers.
As well as tomorrow’s German industry data and Eurozone retail sales figures, Thursday’s German trade balance and the European Central bank’s latest economic bulletin, the euro is likely to experience volatility on the back of the numerous speeches from ECB officials spread throughout the week.
The key amongst these will be tomorrow morning’s speech from ECB President Mario Draghi, amongst others. After recently tapering quantitative easing, policymakers signalled that they could expand or extended it again should the economy shows signs of further weakness.
Considering subsequent data has not printed well, markets will be on edge to see whether the Governing Council is already starting to think twice about their decision. Any clues from Draghi or the other policymakers can give will therefore be carefully scrutinised and priced into the euro.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)