Having plunged the depths in the middle of last week sterling ended the week on a positive note especially against the euro which could be down to an improved long-term outlook following Bank of England member Haldane saying that a mid-2015 rate hike is not out of the question.

A mixture of UK data is to be released in the second half of this week which will keep markets and commentators on their toes. Wednesday sees the minutes released from the latest Bank of England (BoE) meeting. Here we will see which way each member voted and, more importantly, if any more members have voted to increase interest rates this time around. Following several recent dovish statements from voting members, and recent poor performance from the UK economy, it is unlikely we will see any change from the previous meeting.

Aside from this, we will see retail sales data released on Thursday which are expected to show further contraction, and on Friday a preliminary growth estimate for the third quarter of 2014. This is forecast to show a predicted slowdown in UK growth throughout the previous quarter, further underlining the recent travails of the UK economy.

Economic data

With the USA rethinking their stance on monetary policy, some of the pressure on the euro was relieved which saw it push towards three-week highs against the US dollar. There have been doubts surrounding the US Federal Reserve’s plans to end quantitative easing at the end of this month. However, the weakened state of the European economy should make any long term positive momentum a tough task for the euro.

Looking forward to the week ahead, we will see Purchasing Manager’s Index (PMI) figures out across Europe. Data is expected to show growth stagnating for the Eurozone as a whole and contracting for the German economy. Not good news for the euro making it ever more likely that the ECB will have to introduce quantitative easing in the not too distant future. Further problems could arise when the European Banking Authority hand the results of stress tests that they have been undertaking on the banks to over 100 of the largest euro zone’s lenders. These results are made public three days later and the news is not expected to be good as most commentators have been highlighting for a while that more needed to be done to boost banks’ balance sheets. The UK banks are not expected to be among those who have to raise additional capital.

Quantitative easing

The US dollar had a mixed day to end last week, with varying data and outlook affecting the markets. With little of particular significance, the dollar stayed within a narrow range against most of its major peers. Data on the day was mostly positive, as the building permits figures were as expected and the consumer sentiment ahead of expectations. However, the dollar failed to make significant ground thanks to increasing negativity over the longer-term outlook. With continued reaction to Federal Reserve member Bullard’s cautionary words that quantitative easing should be extended, investors looked to central bank Chair Janet Yellen as she spoke in Boston to see if she commented on policy. However, she discussed neither policy nor economic outlook, leaving little for investors to dissect.

This week starts slowly for the dollar, with the first event not due until mid-week. Wednesday will see the key inflation data in the form of a Consumer Price Index (CPI), which is significant given the recent caution. Thursday returns to the labor market, with the unemployment claims figure scheduled as the only major release, before Friday gives us new home sales figures. With data thin on the ground, these could prove important for the week, as investors will scrutinize these results for clues as to the possibility of future prospects.

Turkish lira

• Friday saw the Japanese yen have a poor end to the week as it receded against the majority of its peers as equities gained, which lead to lesser demand for the safest assets. Emerging market currencies improved as a gauge of expectations for fluctuations fell due to global growth, new expectations on US monetary policy and the ever-increasing scare of the outbreak of Ebola. The yen fell almost half a percent to 106.74 per dollar on Friday.

• The Turkish lira saw gains for a third consecutive day, continuing its largest weekly rally in over six months. The factor highlighted for the lira's recent success is that Turkey is on the right side of the current turmoil surrounding the price of energy and commodity-price trade. Turkey relies on imported oil for its energy and has the largest balance of payments shortfall relative to economic output among developing nations.

China data releases are very much to the fore this week covering everything from third quarter growth estimates through to retail sales, industrial production and fixed asset investment. Given the importance of China to the Australian and New Zealand dollar these releases will be very closely watched.

— Charles Purdy, director of Smart Currency Exchange.