US Dollar The Market Maker
As always, it is the US Dollar which is moving the market and impacting on all other currencies. At the end of last week, we saw Sterling finish a bit higher after falling to multi-year lows of 1.5874. Consumer Confidence in the US, rose to its highest level since July 2007 as the trend continues to be one of US Dollar strength. There is rhetoric at the moment regarding the end of quantitative easing and whether this will be stopped when initially planned. Whilst some commentators are saying it will end as planned, others including the Fed’s Eric Rosengren are urging caution saying it’s too early to decide due to the recent turmoil on the stock markets and worse economic data.
In the Eurozone, we eagerly await the results from the ECB’s yearlong inspection of lenders books. Whilst this exercise will have initially worsened lending conditions in the Eurozone as firms prepared for the tests, the hope is that once completed, the banks are in a much better position to boost lending. The ECB will take over banking supervision in November. It could be argued that political assistance is still necessary to move things forward.
Lots of important data out of the UK this week and it should signal a further delay of a possible rate hike. We will undoubtedly see a fifth quarter of growth for the UK but this may not be as strong as previously experienced. Further evidence that an interest rate hike is on the back burner is not likely to be positive for the Pound.
Not a huge amount of data out today of note as we look forward to the rest of the week and the twists and turns that the markets will inevitably take.