Daily Currency Update
After trending in a broadly softer position for much of last week off the back of disappointing UK services data and dovish Bank of England meeting minutes, Sterling could experience a reversal of fortunes over the next few days. If the UK’s CPI shows an increase in annual inflation the Pound may rally. Sterling would be similarly supported if British employment figures print in line with forecasts on Wednesday.
Over the weekend Federal Reserve official Stanley Fischer intimated that while the US economy might be strong enough to withstand higher borrowing costs later in the year, policymakers are concerned about the slowdown in the employment sector. With it being emphasised that domestic data will dictate when the first increase in borrowing costs occurs, the US Dollar is likely to weaken over the next few days if US ecostats (including the nation’s inflation and retail sales numbers) fail to impress.
The Euro was experiencing fairly static trading on Monday due to a lack of notable ecostats for the Eurozone. The news that Volkswagen has recalled cars from China had little impact on demand for the common currency ahead of tomorrow’s ZEW Economic Sentiment and Current Situation surveys. Sliding sentiment may weigh on the Euro but Germany’s final Consumer Price Index numbers are unlikely to have much of an impact on the Euro unless they are significantly revised from previous estimates.
The Australian Dollar’s uptrend against peers like the US Dollar and Pound continued at the start of a fresh week of trading, with the South Pacific currency trending close to a seven-week best against the ‘Greenback’. However, as a surge in risk appetite has been the driving force behind the ‘Aussie’s recent uptrend, weak Australian fundamentals have the potential to unseat the currency. Investors will therefore be paying close attention to Australia’s upcoming confidence and employment figures.
New Zealand Dollar
A risk-on environment coupled with firmer commodity prices and declining hopes of a 2015 interest rate adjustment from the Federal Reserve helped the New Zealand Dollar continue its uptrend after the weekend. ‘Kiwi’ volatility may be limited until the second half of the week and the publication of New Zealand’s Performance of Manufacturing and Consumer Confidence figures. The most important New Zealand report to be aware of this week is the nation’s Consumer Price Index for the third quarter, due out on Thursday.
As the surge in the price of crude oil kept demand for the ‘Loonie’ high, the currency experienced little movement following the release of Canada’s latest employment numbers. The level of joblessness was shown to have increased to 7.1% in September rather than holding at 7.0% as expected. The Canadian Dollar was little changed on Monday and with Canada not scheduled to release any influential reports over the course of this week, further CAD shifts will be the result of US news and commodity price volatility.
South African Rand
On Monday the Rand edged higher against the US Dollar. However, some industry experts believe the bombing in Turkey could sap appetite for emerging-market assets and put the South African currency under pressure as trading continues.