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EUR and GBP hit as busy end of week looms

The European currency saw plenty of volatility yesterday after it slipped back and forth against the dollar.

The euro initially managed to beat the $1.1600 level and then fell back down, before rallying round a little over the course of the day.

While the euro didn’t manage to keep up a consistent performance, the dollar also continued to suffer. It performed badly in a number of its pairs on Wednesday, suggesting the effect of the upbeat performance of the Chinese economy reported earlier in the week is continuing to linger.

Yuan exports were up by 6% in July compared to the previous year, and while imports were also on the rise, the trade surplus is still relatively high. It was in Britain, though, where the hub of the volatility was located.

Suggestions that the government is meeting to prepare for a no deal Brexit are abounding again at the moment, leading to high levels of speculation over how the markets might be affected in the event that the country leaves the bloc without a deal.

On Wednesday, the British pound dropped from its previous high rate at 1.2960 into lower figures, where it is expected to stay.

The pound will also need to contend with information releases tomorrow, when Britain’s preliminary gross domestic product data for the second quarter of 2018 will be published. It is expected that there will be a rise in these figures from 0.2% to 0.4%, although if this is not achieved, there may be a significant knock-on effect as GBP traders sell up.

This will come out alongside data on industrial and manufacturing production, both of which will be interesting given the ongoing wrangling around trade, imports and exports in the context of Brexit.

There’s still plenty to occupy the forex markets during the last two days of the week as well.

On Thursday, all eyes will be back on China for another set of important data releases. These include the country’s consumer and producer price indices for July, and given the market effect that the most recent releases have had, it’s likely that these will also be afforded plenty of attention.

Also on Thursday, similar data from China’s current trading enemy, the US, will be published. Both month-on-month and year-on-year producer price index data for July will be released, while there will also be the usual information about joblessness claims.

CAD traders, meanwhile, will be looking out for the housing price index data for June coming out of Canada at the same time as the announcements across the border.

There will also be some attention paid to the euro again on Friday as a number of important data releases come out of Eurozone nations, too.

The Italian global and EU trade balances for June will be released at 08:00 GMT, while French month-on-month industrial output information for the same month will be announced early in the morning.

The US will also be back in the news on Friday when it reveals its consumer price index data for July at 12.30 GMT.

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