After an extended period of GBP strength, during which the currency consistently broke key markers and reached multi-year highs against both the USD and EUR, the question now is: how long will this trend last, and how far will it go? With several critical data points from the US, UK, and Eurozone emerging, and markets still reacting to last week’s developments, volatility seemed almost inevitable.
In a somewhat rare occurrence, Monday turned out to be the most significant day of the week in terms of data releases, with PMI figures released for the Eurozone, UK, and US. Perhaps the most scrutinized was Germany’s manufacturing data, released at 8:30 AM. Given previous reports showing mounting pressure on German manufacturing, there was hope for a recovery towards the key 50-point mark. However, with forecasts predicting a stagnant result near the previous reading of 42.4, it would have taken a remarkable upswing to shift market sentiment in favour of the EUR. Ultimately, the actual figures came in at 40.3, another disappointing result for Germany, which further pushed the GBP/EUR pairing to recent highs. This trend extended to most of the day’s PMI releases, with nearly all figures coming in below expectations. The UK were the only ones to post readings above 50 for both Services and Manufacturing, though still below forecasts. These results are likely to heighten fears of an economic slowdown and stalling growth.
The remainder of the week was relatively quiet, with the US posting most of the key data. On Tuesday, the US released its latest CB Consumer Confidence figures, with forecasts expecting a drop from 105.6 to 103.9. However, the final figure fell further, landing at 98.7, which was significant as it dipped below the key 100-point threshold. Thursday’s GDP release was also closely watched, although it was a final revision, and no significant deviation from expectations was anticipated. This proved accurate, with figures aligning as expected. While stronger-than-anticipated US unemployment data was released, its impact on markets was minimal, likely due to its status as a weekly report.
Looking ahead to next week, it seems likely that key speakers will dominate market attention, particularly with several FOMC members, including Jerome Powell, scheduled to speak. Coupled with jobs data expected on Friday and other significant releases throughout the week, we could be in for another period of high market volatility.
