What's next for Sterling?
Friday morning’s flash crash for the Pound, caused the currency to drop to a new 31-year low of 1.1840 against the Dollar, and a five-year low against the Euro. Although, Sterling bounced back, it didn’t reach the previous levels. This has now caused investors to have a bearish outlook on the Pound. The uncertainty of the UK leaving the EU, is continuing to see investors pull out of Britain and the sell-off of the Pound is set to persist. With markets expecting improved PMI readings in the construction and services sector, this has yet failed to support the currency. This suggests that Sterling is still in for a torrid time until Theresa May gives a clear indication on what the UK want from leaving the EU.
US Markets are closed today as they celebrate Columbus Day, and as a result there are no high tier data releases on the docket.
The powerhouse of the Eurozone Germany, will release its ZEW Economic Sentiment where confidence in investors is anticipated to show an increase of 4.2, a big improvement from the previous 0.5 reading. The only other risk event which could cause further volatility for the Pound is when MPC member Michael Saunders speaks before the Treasury Committee in London.
- German ZEW Economic Sentiment
- BOE MPC Member Saunders Speech
The focus of the day will be on the US, as the Fed minutes are released early in the evening. All will be watching to decipher when the Fed are looking to raise rates, as November is virtually off the table. This could see further pressure placed on Sterling if the minutes do reinforce that a rate hike is indeed coming by the end of the year. Also, further labour data from the States will be published in the form of Jolts Job Openings.
- Euro Industrial Production m/m
- US Jolts Job Openings
- US FOMC Meeting Minutes
Overnight, China the world’s second largest economy, will release their Trade Balance figure for the month. As the decline in China’s demand has seen a drag on the global economy as a whole, all high tier data releases will be watched closely to see if China’s economy is still slowing. From the US, the weekly Unemployment Claims data will be published and is not expected to change much from last week’s 249k reading.
- China Trade Balance
- US Unemployment Claims
- US Crude Oil Inventories
The week wraps up again with all eyes on the high tier data releases from across the pond. The Monthly Retail Sales reading falls under scrutiny, as we again see if consumer confidence will be as positive as the anticipated figures. Sales for September are due to jump to 0.6% from -0.3% and could see the Greenback strengthen as a result. In the evening, Fed Chair Janet Yellen will deliver a speech at the Fed bank of Boston. Any clues or hints given in this speech towards the timing or further actions of the FOMC, could cause volatility for the Buck as a result.
- US Retail Sales m/m
- US Core Retail Sales m/m
- Prelim UoM Consumer Sentiment
- US Fed Chair Janet Yellen Speech