Mario Draghi’s Thursday meeting to spur Euro losses?
On Friday, Sterling had something of an uneventful day in terms of price action despite UK GDP coming in in-line with analysts’ best forecasts for the third quarter of 2015. There was a rally for the Pound. However, it was very short lived before retreating to where the Pound started versus its most traded counterparts.
The GDP results themselves showed us that the UK economy grew by 0.5% through Q3, and for the year, the economy is tracking at 2.3% growth.
The week starts with something of a whimper on the economic calendar and it is likely that the focus will not be on the UK as we are not scheduled to see the releases of any tier one data.
The Eurozone sentiment indicators were broadly better than expected on Friday morning, with overall economic sentiment among those unchanged from October following its upward revision. While these numbers are encouraging and point to a slight pick up in what is currently a sluggish recovery, we should treat the data with some caution. The surveys were conducted prior to the terror attacks in Paris which could have an impact in the coming months on the services sector. Given that services have been the bright spot in recent surveys, with manufacturing suffering as a result of the emerging market slowdown, it is possible that this optimism could cool again next month.
The most watched event this week will be the European Central Bank council meeting on Thursday. At its previous meeting, the council announced that it would re-examine the degree of monetary accommodation at the December meeting. Since then, statements by decision makers have differed, but statements pointing towards further monetary stimulus were in the majority.
The US Dollar also had a quiet end to the week due to Thanksgiving, but remained within 1.50 levels against the Pound. Much of the price action relating to the Dollar will be determined later in the week with ISM Manufacturing data out on Tuesday, followed by Non-farm payrolls out on Friday. As per usual, we can expect a lot of interest in the payroll data released at the end of the week with the ever present rumours surrounding interest rates in the US. A rate hike seems almost definitely on the cards and should the economic data out this week not stray too far away from expectations, Dollar strength across the board could well follow.
The Dollar remains the favourite for strength across the major currencies and forecasts still maintain an outlook that will put both the Pound and the Euro on the back foot even further.
Given the Dollar strength that we have witnessed of late, further downward pressures are being put on commodity prices as Brent crude oil futures took further declines whilst Gold fell to its lowest levels since early 2010.
Data to watch: 9.30am UK Consumer Credit & Mortgage Approvals. 2.45pm US Chicago PMI. 3pm US Pending Home Sales.