Pound Sterling (GBP) Exchange Rate Puts on Mixed Performance in Quiet Data Week
After initially surging last week on the back of a slightly better-than-forecast UK inflation report, the Pound pared gains against most of its peers and fell to an over two-month low against the Euro before the weekend. This week kicked off dramatically with ‘Black Monday’ and the collapse of global stocks sent commodity currencies to fresh multi-year lows against Sterling. The GBP-USD exchange rate was also able to advance above a key resistance level, although GBP-EUR dropped to a three-and-a-half month low as unwinding carry trades bolstered the Euro. With influential UK data in short supply until the end of the week, Pound movement has largely been dictated by global economic developments. However, if Friday’s UK growth and consumer confidence numbers impress we could see the Pound recoup losses against the US Dollar and common currency while extending gains against rivals like the Australian and New Zealand Dollars.
Euro (EUR) Exchange Rate Boosted by Unwinding Carry Trades, German Data Impresses
There were many currency losers from ‘Black Monday’ but the Euro emerged as one of the winners. With the stock market slump pushing investors to unwind carry trades, the common currency romped higher across the board and drove both the Pound and US Dollar to multi-month lows. Further Euro support came in the form of the German IFO Business Climate, Current Assessment and Expectations surveys, which all printed above expected levels. The European Central Bank’s Vice President also indicated that the institution is confident that the quantitative easing programme introduced at the beginning of this year will be enough to bring inflation back towards target. Comments from another ECB official may cause Euro movement later today, but investors with an interest in the common currency will also be looking ahead to Friday and the publication of Germany’s Consumer Price Index for August. An uptick in inflation in the Eurozone’s largest economy would be Euro-supportive.
US Dollar (USD) Conversion Rate Recovers Losses as Consumer Confidence Surges
Mixed US ecostats had a conflicting impact on Federal Reserve interest rate hike projections last week and accordingly caused some US Dollar volatility. However, the last threads of hope that an adjustment could come in September were snapped on ‘Black Monday’ and the ‘Greenback’ subsequently fell below a key resistance level against the Pound. Although the US Dollar broadly gained on Tuesday after the US Consumer Confidence Index unexpectedly spiked, bets that today’s US Durable Goods Orders figure will show a decline in July limited the currency’s gains. US second quarter growth data is also due out this week and any results which increase the odds of borrowing costs being left on hold until next year are likely to weigh on demand for the US Dollar.
Australian Dollar (AUD) Exchange Rate Flounders on Chinese Stock Slump
The ‘Aussie’ came under notable pressure after China’s Manufacturing PMI printed at a six-year low and recorded extensive further declines in response to the ‘Black Monday’ chaos. After dropping to new multi-year lows against both the Pound and US Dollar at the beginning of the week, the Australian Dollar was able to gradually claw back losses thanks to an unscheduled rate cut from the People’s Bank of China (PBoC). Australia’s Construction Work Done figure for the second quarter also printed well. Before the weekend Australia’s Private Capital Expenditure report and China’s Leading Index/Industrial Profits numbers may inspire a last bout of ‘Aussie’ fluctuations.
Trade Data helps New Zealand Dollar (NZD) Recoup Losses
‘Black Monday’ was a dark day for the New Zealand Dollar, with the commodity-driven currency registering incredible losses against several of its main rivals. As the week progressed the news that New Zealand’s trade deficit widened by less-than-projected gave the ‘Kiwi’ a much needed boost. The New Zealand Dollar was also able to register gains against peers like the Pound and US Dollar as a result of the rate cut in China. As New Zealand isn’t scheduled to release any more domestic data before the weekend, economic sentiment and the performance of the global stock market will be key causes of any ‘Kiwi’ volatility.
Canadian Dollar (CAD) Drops to 8-Year Low against Pound, 10-Year Low against US Dollar
The stock market slump pressured the price of key commodities lower and upped the odds of the Bank of Canada (BOC) cutting interest rates further before the end of the year – circumstances which left the ‘Loonie’ plummeting. After striking an eight-year low against the Pound and a ten-year low against the US Dollar, the Canadian Dollar stabilised on Wednesday. Canadian data has been in extremely short supply this week, but the nation is set to issue two low volatility releases (the Industrial Product Price and Raw Materials Price Indexes) before the weekend.