Earlier this week, we saw various reports suggesting that the GBP/EUR pair may struggle to hold 1.17 following multiple announcements from UK Prime Minister, Boris Johnson. There is much speculation that following the launch of ‘Plan B’, where Mr Johnson has set out an array of new restrictions to curb the spread of new and more transmissible variant, Omicron, we could potentially see the pair pulling back into the mid-1.15s very soon.
On Tuesday, the Claimant Count and ILO Unemployment Rate was announced, both of which are released by the Office of National Statistics to give an overview on the current health of the UK Labour market. Both tools are said to be useful indicators of the value of a nation’s currency as the value of the GBP is inextricably linked to the rate of unemployment where we strive to have more citizens within the labour market in a bid to increase productivity within the economy. Considering this, official figures have reported that the unemployment rate have fallen, despite the end to the Furlough Scheme, with 257,000 new employees being added to company payrolls. This may suggest that the labour market is still on path to recovery which could lead to some strength for the pound.
Looking forward, today we have the Consumer Price Index to be released which is an indicator of inflation in the UK, where a high reading will be seen as bullish, and a lower reading seen as bearish for the pound. We can also expect the Bank of England’s final decision for 2021 regarding whether to raise interest rates or not which will be announced tomorrow, however economic analysts have suggested that due to the rising concern of the Omicron Variant, the bank may be forced to delay any decisions this month and will tackle interest rates ‘once the concerns over the new variant have faded’. Due to this, UK interest rates may only start rising from February 2022.
In recent news for the Euro, the Wholesale Price Index was released by the Federal Office of Germany on Monday to show the value of sales made by wholesalers in Germany. Released data can confirm that wholesale prices in Germany have ‘jumped at a record 16.6% in November of 2021’. This follows a 15.2% rise from October. The relevance of these figures shows not only a growing number of wholesales in Germany, but it indicates an increase in retail trade and consumption amongst German citizens, thus boosting their economy and potentially some favourable movements for the Euro.
In other current news for the Euro, the latest big changes in relation to Coronavirus restrictions include testing for all arrivals to Switzerland, a negative Covid test for all arrivals to France from the UK and only fully vaccinated travellers are allowed to Spain from the UK.
Looking ahead for the Euro this week, the trade balance is set to be announced tomorrow. A country’s trade balance is measured by the difference between the value of a country’s imports versus its exports which can be said to be quite insightful as we can measure how changes in supply and demand can appreciate or depreciate the value of a nation’s currency. The ECB will also announce its interest rate decision which will forecast the direction of the Euro.
In recent news for the USD, the Producer Price Index was released on Tuesday by the Bureau of Labour Statistics as a reflection of ‘the average changes in prices’ amongst producers of US commodities. Recent data has revealed that the prices for final demand goods increased by 1.2. This figure can be indicative of a rise in inflation which could result in some bearish movements for the USD.
Many reports have suggested that the US has spent a lot of its time trying to increase its labour force over dealing with their rising inflation in a bid to increase their productivity and labour force. However, the final FED Interest Rate decision will be held later this week to shed some light on how the US intends to combat inflation and steer towards some bullish movements for the USD.
In addition to the FED Interest Rate decision, we can expect to see some data on the Continuing Jobless Claims which will be released by the US Department of Labour to measure the amount of the US population who are currently unemployed and receiving unemployment benefits, which could add some insight to the current strength of the US Labour Market. This data could prove to be useful as a rise in those who are currently unemployed could lead to a reduction in disposable income for US citizens which could therefore discourage economic growth and result in some bearish movements for the USD. Please contact your Personal Account Manager here at Lumon for further discussion on upcoming currency movements.
This blog post is intended to provide you with information on the services Lumon Pay Ltd (“LPL”) offer and should not be interpreted as advice or as a solicitation to offer to buy or sell any currency or as a recommendation to trade. Foreign exchange rates provided therein are for indicative purposes only and are not intended to give an accurate reflection of current currency exchange rates or to predict future movements in currency exchange rates. LPL, trading as Lumon, is a company registered in England with its registered address at Building 1, Chalfont Park, Gerrards Cross, Buckinghamshire SL9 0BG. LPL is authorised by the Financial Conduct Authority as an Electronic Money Institution (FRN: 902022).