STERLING STILL BEING BUFFETED BY THE UK GENERAL ELECTION

Sterling experienced a modest end to last week, falling slightly against both the euro and US dollar following the latest round of television debates between political party leaders.

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A lack of economic data releases this week will keep investor attention firmly fixed on the UK General Election, with competition likely to intensify as we draw closer to the vote. The major UK event of the week looks likely to be the release of minutes from the latest meeting of the Bank of England (BoE) Monetary Policy Committee.

Although the committee remained unchanged in its decision to leave interest rates on hold, investors will be looking for further insight into their reasoning.

Thursday will see the release of retail sales data for the month of March, which is forecast to show a slight slowdown in sales growth throughout March compared to the previous month. Year-on-year the growth is still expected to be a healthy 5.5%.

Eurozone data this week; will it boost the euro

Greece and its debt problems continue to be the centre of attention. On the whole the rhetoric is positive but until all is agreed it is very difficult to predict the actual outcome. Otherwise the euro enjoyed a steady week last week with no major movements.

Today we have the release of the March Eurozone Purchasing Managers Index for the Service Sector which is expected to hold steady.

Similar to the UK we then have a raft of data covering output for industry and manufacturing for the Eurozone released towards the end of the week. If the Greek debt problem doesn’t blow we could see some confidence return to the Eurozone economy and possibly the euro.
Will the US Dollar bounce back?

Fridays big event was the Non-farm payroll figures. After a period of exceeding expectations this came in much lower than expectations. Was this a surprise, probably not, as we had already seen economic data releases on a downward curve for the last few weeks.

The strength of the dollar has certainly been hurting US exports and the removal of the quantitative easing programme has also reduced the “adrenalin rush” that had powered the US economy over the last few years. The likelihood of an increase in US interest rates happening soon seems to be receding. Although we saw a some weakness for the US dollar it wasn’t significant.

This week, we will see the release of the Federal Reserve meeting minutes on Wednesday, which should show a detailed report of their most recent meeting. With various members recently showing mixed signs of a preferred time for a rate hike, it will be interesting to see where the majority sits and what figures they want on increased growth before agreeing to raise interest rates.

With the less significant weekly unemployment claims indicator on Thursday and import prices on Friday, we could be in for a quiet week.

How is China’s economy faring?

• HSBC’s Purchasing Managers Index for China is released on Thursday. It is expected to continue to show contraction but an improvement on the previous month. China is not moving forward as quickly as it once did but is still a key driver for the world economy

• More positive data out of Canada saw it complete what was a very positive week all around, as it extended its position of three-month highs. This was largely due to Statistics Canada reporting that retail sales rose 1.7% in February, significantly exceeding the expectation for a 0.2% gain.

Jackie Nicholls, Website: overseasguidescompany.com

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