Sterling rallies and nears 2017 highs...

Week Commencing Monday 11th September 2017

 

EZ: Eurozone growth confounds experts ... how high can it get?

The European Central Bank (ECB) has raised its Eurozone economic growth forecast for this year to 2.2 percent, the fastest growth in 10 years.

The health of the Eurozone economy has confounded critics this year after a series of electoral setbacks for Eurosceptic parties in the Netherlands, Austria, and France has boosted business and consumer confidence. The Eurozone’s economy has now expanded for 17 consecutive quarters and unemployment has dropped to a nine-year low of 9.1 percent.

In comparison, In the March-June period, Britain’s economic output grew by 0.3 percent on the quarter, edging up from a sluggish rate of 0.2 percent in the first three months of the year. In its latest forecasts, released in July, the International Monetary Fund estimated the euro zone would grow 1.9 percent this year and 1.7 percent in 2018, above Britain’s projected growth of 1.7 percent this year and 1.5 percent next.

UK: London remains the worlds number 1 financial centre despite Brexit fears!

London remains the globe’s most attractive financial centre, extending its lead over New York despite the UK’s looming departure from the European Union, a survey found on Monday.

London was placed first, followed by New York, Hong Kong and Singapore in the Z/Yen global financial centres index (GFCI), which ranks 92 financial centres on factors such as infrastructure and access to high quality staff. New York was 24 points behind the British capital, the biggest gap between the two since the survey started in 2007.

This is great news to City big wigs, petrified that London will lose its qualitative edge as Brexit rips part of its market away. Fingers cross it continues!

 

FX Forecast

Sterling (GBP) - Sterling continues to push north despite ongoing Brexit woes, hitting the coveted 1.10 versus the Euro and blasting through 1.31 versus the Greenback. We expect this trend to continue, especially as markets get to grips with a less aggressive Federal Reserve in the US. We expect rates to remain range bound, potentially edging northwards versus the Dollar and stable to negative versus the Euro.

US Dollar (USD) - The Dollar continues to struggle after a number of Fed members indicated interest rates would not be going up as fast as previously though. This, coupled with increased concern over Trump’s presidency, should continue to keep the Dollar depressed for the time being.

Euro (EUR) - The Euro continues to defy the odds, having finally pushed over 1.20 on EUR/USD. We expect this trend to continue while we see solid EZ economic data. Brexit continue to weight on GBP/EUR, with both currencies susceptible to Brexit related news flows.

 

Economic Calander for the Week

UK Data:

We have a busy week for the UK with CPI kick-starting the week on Tuesday. We expect inflation to be confirmed in at 2.8% for August, which is 0.2 percent higher than the previous release for July. Moving to Thursdays Bank of England meeting, we expect no policy shifts whatsoever, however the MPC summery and minutes will be closely watched for Brexit and future GDP hints.

US Data:

We start the US week with PPI on Wednesday, which we expect to be posted at 0.3 percent versus last months -0.1 percent previously. This is then closely followed by CPI on Thursday, where we expect to see a 1.8 percent post for the month of August.

Finally, we expect to see a sharp decline in US retail sales for the month, pushing down to a mere 0.1 percent versus last months 0.6 percent print. 

EU Data:

We have a quiet week for the Eurozone with Industrial Production the only highlight. We expect IP to edge up markedly from -0.6 percent to 0.1 percent for July, thereby pushing up the annual figure to an impressive 3.4 percent.

 

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