Daily Currency Update
Although the Pound was initially bolstered as Federal Reserve interest rate hike expectations were pushed back following last week’s FOMC policy meeting, the British currency has since recorded widespread losses as a result of bets that the Bank of England (BoE) won’t take action before the Fed. With no UK data to stem the flow of losses, the Pound fell against peers like the Euro, US Dollar and Australian Dollar. Today’s UK BBA Loans for House Purchase report could have a modest impact on Pound trading.
Commentary from the European Central Bank (ECB) regarding the likelihood of quantitative easing being expanded triggered a Euro rally on Wednesday. While ECB chief Mario Draghi did assert that policymakers were considering further loosening, he implied that it was too early to assess when such measures might be appropriate. With the threat of additional QE lifted for the time being, the Euro advanced on both the Pound and US Dollar before the close of trading. The Euro held gains despite the German GfK Consumer Confidence survey coming in at 9.6 rather than the 9.8 projected.
Uncertainty surrounding the Federal Reserve’s timeline for increasing interest rates resulted in patchy US Dollar trading yesterday. Data confirming that the rate of US manufacturing output remained at a two-year low didn’t prevent the ‘Greenback’ rallying against the Pound, but if today’s US Durable Goods orders figure also provides cause for concern, the US Dollar could struggle as we approach the weekend.
Less-than-impressive Chinese manufacturing data left the Australian Dollar struggling for much of Wednesday’s session. The concerning rate of contraction in the manufacturing sector of the world’s second largest economy weighed on commodity currencies and sparked speculation that the Reserve Bank of Australia (RBA) may have to reconsider its plan to leave interest rates on hold for the foreseeable future.
New Zealand Dollar
Rising dairy prices helped the New Zealand Dollar recover from a China-inspired slump on Wednesday, although gains were tempered following the publication of New Zealand’s latest trade data. The report revealed that the nation’s shortfall expanded to its widest for almost a year in August – largely due to a drop in exports. With data from the South Pacific region lacking for the rest of the week, global developments and commodity price movements will be dictating ‘Kiwi’ trading.
An increase in oil prices bolstered the ‘Loonie’ yesterday, but below-forecast domestic retail sales data ensured that any advance was modest. Retail sales were shown to have risen by 0.5% on the month in July following a negatively revised increase of 0.4% the previous month. A 0.7% gain had been forecast. Retail sales less autos printed at 0.0% rather than 0.5%. With no Canadian data to be aware of this week, investors will be looking to news from the US for guidance.
South African Rand
After falling from a three-week high against the US Dollar ahead of the South Africa Reserve Bank (SARB) interest rate decision, the Rand was little-changed against its major rivals following it. The central bank left interest rates on hold, as expected, but asserted that it was prepared to take action if the domestic inflation outlook deteriorated.