Forex Weekly Round Up 23 March 2015 – 27 March 2015
The Dollar was weaker on Friday after the US interest increase dominated the headlines. This time Atlanta Federal Reserve President Dennis Lockhart played down the certainty of a June rate increase. Lockhart indicated it could be during June, July or September policy meetings, barring a significant downturn in the economy.
3 and 6-month bond auctions were successful for the US, pushing the yield down to 0.02% and 0.105% respectively. Crude oil prices are still having a major impact on the Dollar, with crude oil rising almost 2% yesterday from $45 to $46 per barrel.
The US Dollar has lost some if it’s strength in the currency market due to Durable Goods Data being weaker than expected.
In Europe, Mario Draghi spoke at the Economic and Monetary Affairs Committee, where he gave a positive outlook for the Eurozone. Draghi mentioned that although the ECB expects inflation in the Euro Area to remain very low or negative in the months ahead caused by volatile energy prices.
Business output in Europe grew at its fastest rate in nearly four years in March, the Markit composite purchasing managers’ index rose to 54.1 compared with 53.3 a month earlier – the highest level in 46 months.
Bank of England policymaker Kristin Forbes has reported that UK inflation will probably keep on falling now it has hit zero. The Bank of England could cut interest rates if it falls too far. With interest rates being low people will now have more money in their pockets, which should mean more spending.
Sterling strength is likely to cause import prices to fall even further. For example, with the GBP being strong against the EUR the cost of goods is cheaper.
British retail sales rose at the fastest pace in three months in February, beating expectations and suggesting Britain’s consumer-led economic recovery remains strong ahead of national elections in May. Retail sales rose 0.7% last month, their best growth since November and up from 0.1% in January, the Office for National Statistics said on Thursday.
Our analysis of the markets in the next three months is further weakness in the euro and strengthening of the dollar. Weakness in the Euro is good for those who are buying euros and dollar strength is better for those who are selling dollars. The currency markets are liquid and volatile, however, so we may see movements outside this pattern.
Those looking to buy Dollars and sell Euros should consider a Forward Contract to hedge against adverse movements in the long term. Please contact us for your free, no obligation FX analysis.