By Jake Trask at UKForex, an international money transfer service.
Monday saw a relatively quiet start to the week, with Eurozone data releases printing better than expected. First up, we had the final CPI reading for January which improved on the flash estimate of 0.7%, coming in at 0.8%. The monthly German IFO Business Climate also beat expectations, showing a reading of 111.3 (exp 110.7). EUR/USD rallied to 1.3772 as a result.
Tuesday saw positive news for sterling with the release of the monthly BBA Mortgage Approvals for January, showing strong readings of 50k for Jan (exp 47.9k). This was a 38% improvement on a year ago, and the highest since September 2007. Later in the morning, the CBI’s monthly Realised Sales survey printed a much better than expected 37 (exp 15) which points to a strong March Retail Sales figure. Cable, which had been as low as 1.6590 the day before, broke through 1.67 on the news. German GDP printed as forecast at 0.4% and was followed by the latest Eurozone economic forecasts for 2014 which painted a slightly rosier picture compared to Autumn’s estimates.
Tuesday afternoon saw the release of the US CB Consumer Confidence Survey which printed 78.1 (exp 80.2). The recent soft data and possible slow-down in the recovery seems to have fed through to the average American. Instead of pushing higher, cable dropped dramatically from 1.6720 to 1.6642 within a matter of minutes. One explanation given was of rumours originating from Russia of a possible Ukrainian default. These losses were quickly reversed, though the situation in Ukraine continued to affect the markets as the week progressed.
Wednesday’s big release was the revised UK 2013 Q4 GDP figure which showed an unchanged reading of 0.7%. The accompanying Q4 Business Investment reading disappointed however, showing growth of 2.4% (exp 2.6%). Recent comments from Mark Carney and other MPC members highlighted that business investment and exports are key to a balanced recovery – the UK isn’t quite at “escape velocity”, to quote the BoE Governor.
Cable hovered around 1.6690 on the release and fell as the day progressed, eventually finding support at 1.6620 as risk aversion on the back of the situation in Ukraine continued to dominate the news. Later in the day, the US New Home Sales release showed an annualised 468k newly built properties were sold on January. This beat estimates for 62k and further benefitted the greenback. On a quiet week from the antipodean currencies,
Wednesday night saw a poor Private Capital Expenditure reading from Australia printing -5.2% (exp -1.0%) with the slowing economic conditions showing that businesses in Australia are tightening their belts. AUD/USD dropped from .8960 to .8916 on the news. News from New Zealand was much more upbeat, with a monthly trade surplus of NZD306m beating expectations by NZD76m.
Thursday saw a mixed bag of data from the States with Core Durable Goods coming in at a better than forecast 1.1% (exp -0.1%). Unemployment Claims 348k (exp 333k) and Durable Goods 1.0% (exp -0.7%) came out worse than expected however, adding to the recent mixed picture on the state of the US economy. Cable moved up from a low of 1.6615 to 1.6672 after the releases. Later in the day, Janet Yellen spoke and raised the possibility that the Fed may pause its tapering of asset purchases should the mixed data continue into the spring (when poor weather can’t be blamed!).
Friday’s big release showed a better than expected Eurozone CPI reading of 0.8% (exp 0.7%) which was unusual given the German and Italian readings came out under-par. The higher reading gives the ECB some more breathing space and makes any rate cuts or LTRO3 unlikely for now. EUR/USD hit a week high of 1.3812 with EUR/GBP jumping from .8190 to .8254.