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The Trend Is Your Friend

The Trend Is Your Friend

There is an old trading phrase that “the trend is your friend” which means you should look at where the market has been recently when thinking about where it’s heading in the future. For Sterling at the moment, the trend is anything but friendly as further poor results have weakened the Pound. Yesterday saw the release of a pretty dismal CPI report and this saw Sterling take yet another hit and sink below the 1.5900 level against the Dollar.

Where will this end? Who knows… What is for certain is that the underwhelming data over the last few months has created a much gloomier outlook for Sterling and the debates over when and not if interest rates will rise, have vanished.UK Labour market data is out today and things arent looking overly positive on that front either so we could see further weakness.

The Eurozone is also struggling at the moment with a plethora of poor data coming out of Germany in particular. German ZEW collapsed, industrial output was worse than expected, growth estimates for 2014 and 2015 have also been slashed. Allied with poor inflation data from Spain, Italy and France, things aren’t looking too rosy for the Eurozone either.

All the strength is in the US Dollar at the moment and as their data has come in better than expected over the last few weeks, the interest rates hike “competition” seems to have become a one horse race.

It’s a hugely busy data day today. We have CPI from Germany and Mario Draghi is speaking this morning. From the UK, we have claimant count rates, average earnings and unemployment rates. From the US, there are mortgage applications, PPI, hugely important retail sales and the Beige Book.

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