Christmas is almost here and most places in world will be shutting down for a few days to enjoy a little bit of (well deserved) time off. Obviously in most cases work has to continue though; so in between the office parties, the Christmas sales and last opportunities for business, if you have to make some currency transfers read on and I will highlight economic data releases which will most likely affect the markets over the festive period.
Europe & the UK
Over the last week we have seen a narrow election vote in Austria and the Italian’s vote down a big constitutional change. The latter of those events caused GBP to briefly surge against the Euro reaching a recent high of €1.2036 before falling back at a tremendous rate, to €1.1808 This happened mainly due to an appearance by ECB president Mario Draghi to reassure the markets, but also because Italian Prime Minister Matteo Renzi didn’t quit immediately, but vowed to stay on to oversea final 2017 budget implementations. He has now tendered his formal resignation which was accepted on Wednesday, although when he will actually leave office is yet to be confirmed.
This week we have seen GBP fall further as manufacturing output fell in the UK month on month to -0.9%, this cause GBP to plummet against the Euro going from €1.1804 down to €1.1705. That was until Thursday afternoon when Mario Draghi spoke again and confirmed that QE in the Eurozone is going to be extended to the end of 2017 and is scheduled to reach the staggering height of $2.4 trillion.
Overall GBP has been holding between €1.16 to 1.20 for the last month; is this the new safe ground for Sterling? This will depend on how quickly Italy elects a new president and what his or her policies will be. The court case involving triggering article 50 for Brexit is of course looming over things, the judges have said they want to make a speedy decision although this won’t happen until the new year (when they will actually do this is anyone’s guess). My thoughts are that we will see into the new year between the range of €1.16 & €1.20 as we are now.
News to watch out for:
Tuesday 13th December 09:30 am – UK CPI (Consumer Price Index) figures
Wednesday 14th December 09:30 am – UK unemployment claims
Wednesday 14th December 10:00 am – Eurozone industrial output month on month
Thursday 15th December Midday – UK MPC bank rate (interest rates expected to stay the same)
Friday 16th December 10:00 am – Eurozone CPI figures for the year
Tuesday 20th December 09:30 am – UK public sector net borrowing
Wednesday 21st December 10:00 am – German unemployment change
Minimal important news until the new year after this, watch out for a new Italian Prime Minister though and of course news in the courts affecting the Brexit vote.
Across the pond, the Trump factor has well and truly sunk in now and people are back to going about their everyday business (although some snowflakes are still crying about it). The Dollar has been gaining steady ground against GBP and the Euro, with the biggest movement in the last week coming on Thursday afternoon, most likely due to the QE mentioned above.
Ever since the initial worries about President Elect Trump the Euro has steadily lost ground falling from the $1.1284 level just after the election to reach a near 10 year low of $1.0519 (10 year low being $1.0495 in 2015). Before ECB President Draghi spoke, the Euro had made some recovery to reach $1.0828, but it has now fallen back sharply to $1.0610
After we have seen record sales for Black Friday and Cyber Monday, you can expect some good news coming out for the US economy, so be prepared for the Dollar to hit new highs. Come the new year, we could see it reaching parity with the Euro and gaining ground against the pound.
Prediction for USD exchange rate in the new year – between $1.03 and $1.05 against the Euro and $1.22 to $1.25 against GBP.
News to watch out for:
Wednesday 14th December 1:30 pm – Retail sales month on month
Wednesday 14th December 2:30 pm – Industrial production month on month
Wednesday 14th December 7.00 pm – FOMC economic projections
Thursday 15th December 1:30 pm – Unemployment claims
Thursday 22nd December 1:30 pm – GDP for the quarter
Obviously if Trump says anymore ridiculous statements over Twitter (like mentioning the possibility of cancelling the new $4bn Air Force One did to Boeing) there could be some impacts just because of that. This is unfortunately a side effect of having someone in the White House that we all have no idea about. So keep your eyes on what the President Elect has to say as it could very well have a surprising impact.
To discuss your currency requirements or you have any questions about the above, feel free to contact Currency Pal https://currencypal.co.uk/contact/
Have a great Christmas and New Year!