Daily Currency Update
An impressive increase in UK Mortgage Approvals helped the Pound consolidate previous gains against the Euro on Wednesday and the GBP/EUR pairing managed to advance above the 1.42 level ahead of the publication of Germany’s unemployment and inflation data. Sterling also continued to trend around the 1.56 level against the US Dollar following the FOMC’s latest interest rate announcement as the central bank failed to lend much support to September rate hike expectations. While the UK economic docket is sparse today, tomorrow’s GfK Consumer Confidence index may prompt additional Pound movement.
The Euro’s downtrend against the Pound continued yesterday as the Greek Prime Minister threatened to call an early election if members of his own party didn’t support the austerity measures approved by the local government in return for securing emergency funding. The German GfK Consumer Confidence index came in at 10.1 in August, as expected by economists, and had little impact on the common currency. Today the Euro could experience volatility in response to Germany’s latest employment and inflation figures. The Eurozone is also set to publish a number of sentiment measures.
During the North American session the ‘Greenback’ fluctuated following the Federal Open Market Committee’s (FOMC) interest rate announcement. While the central bank was fairly positive about the local economy, it failed to offer much in the way of fresh forward guidance. Some interpreted the reluctance to commit to a September adjustment as a sign that rates are unlikely to be raised until December, but any US Dollar losses were limited ahead of today’s US growth report. Sturdy expansion in the second quarter would put a September hike back on the table and would probably drive USD higher.
The Australian Dollar remained within touching distance of a six-year low against the Pound after Australia’s latest building approvals report fell flat. Approvals were shown to have plummeted by -8.2% on the month in June, a far steeper slide than the -1.0% dip anticipated. The nation’s import price index also came in at 1.4% rather than the 1.5% expected while the export price index was down -8.2% in the second quarter, worse than the -4.0% fall forecast.
New Zealand Dollar
During the Australasian session the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was able to achieve a high of 2.5358 as investors ditched the ‘Kiwi’ in response to the latest remarks from Reserve Bank of New Zealand Governor Graeme Wheeler. The RBNZ chief inferred that borrowing costs are likely to be reduced further in the near future and the prospect of lower borrowing costs drove the New Zealand Dollar down across the board. New Zealand’s building permits report also revealed a -4.1% decline in June, month-on-month.
Despite a lack of notable Canadian data, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate experienced a very rocky trading session, with the pairing initially jumping by 120 pips before shedding all of its gains during the afternoon. However, the current situation in China and status of the commodity market means that the ‘Loonie’ is likely to remain close to multi-year lows against the Pound for the foreseeable future.
South African Rand
Wednesday’s South African employment data might have shown a bigger-than-forecast drop in the nation’s unemployment rate but it offered the Rand little respite. The emerging-market currency continued trending lower against the US Dollar ahead of today’s US second quarter growth report. If the data shows the acceleration in expansion predicted by economists, further Rand losses could be on the horizon.