Daily Currency Update
Wednesday saw the Pound experience a fairly volatile trading session, with Sterling slumping to a one-month low against the Euro in response to disappointing UK employment figures but gaining on the US Dollar as a result of revised Federal Reserve rate hike expectations. The UK's latest jobs data revealed a sharper-than-forecast dip in average earnings and the impact this may have on the Bank of England's (BoE) policy outlook had a generally detrimental effect on demand for the Pound. A better-than-expected RICS House Price Balance number helped the GBP/EUR exchange rate claw back some of its losses on Thursday.
The common currency gained across the board as the week progressed and the recent positive developments in Greece continued to shore up sentiment. News from China also gave the Euro a boost as the Yuan devaluation weighed on Federal Reserve interest rate hike bets. On Thursday Germany's final Consumer Price Index confirmed the previously estimated monthly and annual rates of inflation. While this data had little impact on the Euro, tomorrow's growth figures for the Eurozone and its largest economies are likely to cause movement.
As the People's Bank of China (PBoC) devalued the Yuan by a further 2%, concerns that the move could lead to a currency war and damage the global economic outlook led some investors to bet that the Fed will hold off adjusting borrowing costs until the end of Q1 2016. Subsequently, the 'Greenback' tumbled against the majority of its rivals. However, a stronger-than-forecast US Advance Retail Sales figure could help the world's premier reserve currency recover ground.
Commodity-driven currencies like the Australian Dollar initially plummeted as a result of the PBoC's second announcement regarding the Yuan. But the 'Aussie' staged an impressive rebound later in the session as a result of US interest rate speculation. During Australasian trading domestic data revealed that Australian Consumer Inflation Expectations rose from 3.4% to 3.7% in August, moving further above the RBA's 2-3% target, and the GBP/AUD currency pair swiftly returned to trending in the region of 2.1276.
New Zealand Dollar
Chinese developments left the 'Kiwi' struggling on Wednesday and this downtrend continued on Thursday. The appeal of the New Zealand Dollar was also lessened by the domestic Performance of Manufacturing Index sliding from 55.1 to 53.5 in July. Before the weekend New Zealand's Retail Sales numbers are likely to inspire another flurry of NZD fluctuations.
The Canadian Dollar surged by almost 150 pips against the Pound on Wednesday thanks to the prospect of a September rate adjustment from the Fed being diminished by the latest Chinese news. The 'Loonie' was putting on a largely mixed performance ahead of the publication of Canada's New Housing Price Index for June. A disappointing result would add to the Canadian Dollar's recent woes and may inspire declines in the currency.
South African Rand
Although the devaluing of the Yuan led to a dramatic sell-off of emerging-market currencies, the Rand reasserted itself after investors speculated that the action may deter the Federal Reserve from altering borrowing costs. Today's South African Mining Production numbers could see the Rand fluctuate as the session continues.