Daily Currency Update
As Super Thursday dawned, the Pound was trading within touching distance of the 1.44 level against the Euro and standing firm above 1.56 against the US Dollar. Yesterday’s disappointing UK Services PMI had little impact on demand for the Pound in light of expectations that today’s Bank of England (BoE) publications will support UK interest rate hike expectations. If the trio of releases (BoE rate announcement, meeting minutes and inflation report) fail to contain the hawkish tones expected however, Sterling could stumble across the board.
A softening in the Eurozone’s Services PMI, coupled with an unexpected slump in the region’s retail sales figures, left the Euro trending in a slightly softer position against several of its currency counterparts on Wednesday. Reports indicating that Greece is unlikely to recover unless it receives substantial debt relief also took a toll on the Euro. Today’s Retail/Construction PMI figures and Germany’s Factory Orders report could prompt additional Euro movement in the hours ahead.
Although the US published mixed ecostats on Wednesday, investors chose to dwell on the sub-par ADP Employment Change number and widening trade deficit rather than the bumper improvement in the ISM Non-Manufacturing PMI and the ‘Greenback’ broadly softened. Super Thursday could see the GBP/USD exchange rate advance beyond the 1.57 level if the BoE releases indicate that the UK central bank could be in line to adjust borrowing costs before the Federal Reserve.
Yesterday saw the Australian Dollar give up some of its RBA interest rate decision inspired gains against peers like the Pound and US Dollar. The ‘Aussie’ softened further still during the local session as the Australian unemployment rate unexpectedly increased from 6.1% to 6.3%. The increase was largely due to a spike in the participation rate, but the GBP/AUD currency pair was still able to return to trending at the 2.1323 level.
New Zealand Dollar
The New Zealand Dollar continued to feel the repercussions of the recent dismal dairy auction and disappointing domestic employment figures on Thursday, with the GBP/NZD exchange rate holding the 2.3917 level ahead of the publication of the BoE’s influential reports. With no further ecostats for New Zealand scheduled for release before the weekend, additional ‘Kiwi’ movement is likely to be the result of global economic developments and commodity price shifts.
During yesterday’s European session the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate achieved a fresh 7-year high in spite of the UK’s comparatively poor Services PMI and an increase in crude oil prices. The pairing has the potential to advance even higher today if the BoE signals that the UK should be preparing for higher interest rates.
South African Rand
The Rand briefly weakened beyond the 20 Rand per Pound level as local domestic concerns and the prospect of higher UK borrowing costs supported GBP/ZAR. If Friday’s US Non-Farm Payrolls number prints strongly we can expect further weakness from the South African currency.