British pound: Busy week ahead (page 2 of 2)

Despite the lack of any significant economic news, investor sentiment remained bearish, as Experian expects the UK financial-services industry to cut 10,000 jobs over the next three years and house prices to fall 7.9% over the next two years.

The British pound should be a big focus in the week ahead with PPI, employment and the Bank of England Quarterly Inflation report due for release.

Oil prices are setting new records which will keep the central bank hawkish, but at the same time, they may express concern about growth. We continue to expect the British pound to underperform the US dollar as the economy continues on its downward spiral.

The Diverging Performance of Commodity Currencies

There has been a sharp divergence in the performance of the Australian, New Zealand and Canadian dollars this week.

The Aussie has held near its year to date highs thanks to hawkish comments from the Reserve Bank of Australia and stronger than expected employment numbers.

The New Zealand dollar on the other hand has plummeted to three month lows as employment falls by the most in 19 years. The Canadian dollar has been stuck in a very tight trading range and is now making another attempt to break lower on the back of stronger employment numbers and record oil prices.

Relative performance has played a big role in the price action of the three commodity currencies but that could change in the coming week with no major economic data released from any country other than New Zealand, who has retail sales and producer prices on their calendar.

Risk Appetite Continues to Pressure Carry Trades

The Japanese Yen has had a very good week as investors continue to curb their risk appetite. There will be a lot of Japanese economic data released next week, but it remains to seem whether this data will matter for the Yen.

Money Supply and Broad liquidity figures are expected to be unchanged, as BoJ officials remain reluctant to increase liquidity in fears of fueling further inflation.

In contrast, Bank lending and Machine Tool Order figures should decline, as businesses remain sceptical about global demand, and contain themselves from expanding.

Bankruptcies and Eco Watchers Survey figures should be gloomy, as dejected consumers cut back on spending, and in the process hurting overall business sentiments, as local demand for products continues to decline.

Near the end of the week, Machine Order, GDP and Consumer Confidence figures should help confirm investor fears that the once recovering economy has slowed again.