The currency market could see a lot of volatility today as there is a lot of key economic data being released from the UK, Europe and the U.S. The first figure to look for today will be the unemployment rate out of the UK at 9.30, which is expected to be worse with a rise to 8.2%. Reinvigorating the stalling job market is probably the UK’s biggest challenge at the moment as we have seen a continual rise over the last year in the unemployment rate and the number of unemployed people. This figure should already be priced into the market but any substantial rise in the rate could see Sterling drop across the board. Mervyn King is speaking today at 10.30am and will outline how the BoE sees the current economic situation in the UK. At the same time the BoE will also release their quarterly inflation report which should be interesting given the fall in inflation to 5% that we saw yesterday. Mervyn King has a habit of talking down Sterling so we could see a slight fall in GBP/EUR over the course of his speech.
The Eurozone release CPI data at 10.00 and this is expected to fall to 0.3% which would indicate a slow down in spending in the Eurozone. A poor figure here would put more pressure on the Euro and we could see EUR/USD fall to under 1.35. The U.S. also releases CPI data at 13.30 today which is expected to have risen slightly over the course of the last year to 2.1% which would be positive for the U.S. economy. I think there will be one eye on tomorrows U.S. jobless claims, which will show if the increased spending coincides with an increase in job opportunities.
The main benefactor of the data being released today and throughout the rest of the week could be the USD. We expect is to continue strengthening against both Sterling and the especially the Euro so if you need to sell Dollars now may be a good time to do so. Sterling seems fairly content at just under 1.17 against the Euro but we could see it fall throughout the course of the day as and when figures come out.
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