A lack of significant economic data from the UK on Friday put sterling at the mercy of data released elsewhere. Positive data from both the Eurozone and US caused the UK sterling to drop slightly throughout the day.

This week, key releases begin on Wednesday, with manufacturing production data in the morning. Thursday will be a busier day, with more opportunities for sterling movement, with minutes from the Bank of England (BoE)’s Monetary Policy Committee (MPC) due, as well as the monthly vote on interest rates. Last month saw only one member vote for a rate rise. Given the events in China and their ripple effect on global economies, a shock increase in interest rates is unlikely.

The question of QE for the euro

The euro strengthened slightly against sterling on Friday, but the only significant moment came from US non-farm payroll data, which weakened the euro slightly against the US dollar, before moving back to previous levels. German factory orders declined by 1.4 percent in July, compared to expectations for a 0.6 percent slip, which also contributed to the slight euro weakness.

The European Central Bank (ECB) indicated last week that it could expand its quantitative easing program amid increased risk to its inflation target. The central bank also lowered its forecast for growth and inflation, with the main reason being slow growth in China. As such, the euro is expected to remain under pressure this week, particularly with Eurozone growth figures on Tuesday expected to fall slightly, from 0.4 percent to 0.3 percent, and German growth figures expected to remain flat.

Will the US dollar continue to strengthen this week?

Friday continued to give US dollar strength, even with worse-than-expected non-farm employment change. However due to the July figures being revised up, and unemployment continuing to drop, this allowed the US dollar to strengthen further.

Average hourly earnings — a key economic indicator for the US economy — also showed further improvements.

This week could start off slowly for the US economy, with a Labour Day bank holiday on Monday. We will see the first piece of significant data out on Wednesday, with JOLTS job openings expected to show slight growth on the previous month’s figures. Weekly unemployment change on Thursday is also expected to show a stable figure. Friday will see the release of producer inflation data, which is expected to show its second negative figure in the last six months.

Also released on Friday will be consumer sentiment data, which is expected to register a decline. With these discouraging figures due, we could see a turn in the US dollar’s fortunes.

— Charles Purdy is director of Smart Currency Exchange.