Currency Report

Currency Report

The dollar on Friday posted its best weekly performance in more than seven months after strong U.S. retail sales and producer prices data for September reinforced expectations the Federal Reserve would raise interest rates in December.

We continue to see dollar strength on the back of this. Same ongoing theme for clients selling USD/AED  with a great opportunity to secure a price on spot and forward contracts. We assume that closer to the elections we should see some volatility and depending on who wins could have an impact on the USD but no signs of that being priced in just yet. If clients need to buy USD or AED they may see an opportunity towards election period but since the pound is so weak we can�t assume that it will be major. The Pound is unlikely to make a significant recovery in the immediate future as investors remain uncertain over �Brexit� and how it will impact British businesses.

The Pound�s dramatic depreciation against the Euro following the UK�s vote to leave the EU has caused a major row between supermarket Tesco and brand supplier Unilever. Unilever had sought to raise its wholesale prices by 10% to counteract rising costs caused by the low value of the Pound in the wake of �Brexit�, and in response Tesco removed Unilever brands from its online store.

While ultimately the impact of the Marmite row on the GBP EUR exchange rate was minimal, it will do little to reassure investors who already worry about how the low value of the Pound will impact British businesses as rising import costs squeeze profits.

Euro (EUR) has been volatile amid ECB Speculation.  Recent speculation on whether the European Central Bank (ECB) will begin to taper its quantitative easing programme has caused some volatility for the Euro as markets remain unsure on the bank's position.  All eyes on this week�s ECB rate decision meeting as they hope it will provide some indication of how it will move.

The pound has fallen 18 percent since the June 23rd vote to leave the European Union and is the worst performer this year in a basket of major currencies. It�s also down about 18 percent versus the euro, at about 90 pence against the single currency.

Data to watch out for this week :

TUE
UK And US CPI data
WED
UK Claimant Count
US Fed Beige Book Published
THUR
UK: 09.30 Retail Sales
EU-ECB Re+ Rate Announcement/ECB Press Conference
US: 13.30 Initial Jobless Claims
 
Author:  Anjulie Patel IFX International Foreign Exchange 

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