Daily Currency Update
The Pound was trending in a fairly narrow range against both the Euro and US Dollar after advancing slightly ahead of the release of the UK’s second quarter growth data. Should the GDP report show a rate of quarterly expansion of 0.7% or higher we can expect Sterling to enjoy a broad-based rally. However, if the UK economy is shown to have grown by less-than-forecast in the three months through June it would push back Bank of England (BoE) interest rate hike expectations and weigh on the British currency.
Yesterday reports of a Greek ‘exit plan’ had little impact on demand for the Euro. The scheme to prepare for a potential ‘Grexit’, put together by the nation’s former finance minister, included a blueprint for setting up a parallel banking system and returning to the Drachma. Although Syriza was criticised for plotting to leave the Eurozone, the odds of Greece exiting the currency bloc are now so slim that the Euro weathered the revelation with ease. A lack of ecostats for the Eurozone could limit Euro movement today.
Monday’s US Durable Goods Orders report may have printed above expected levels, but the US Dollar still softened against several of its most traded currency counterparts ahead of this week’s Federal Open Market Committee (FOMC) interest rate announcement. The ‘Greenback’ could recoup losses during the North American session if the day’s Markit Services PMI and Consumer Confidence index support the case in favour of higher borrowing costs.
With Chinese stocks plummeting by a mammoth -8.5% on Monday, the Australian Dollar weakened against a number of its rivals. The GBP/AUD currency pair was able to breach a new six-year high while the AUD/USD pairing remained below the 74 cents level. Given the dearth of economic reports scheduled for release from Australia, global economic developments and commodity price shifts are likely to remain the biggest causes of ‘Aussie’ movement.
New Zealand Dollar
News that Beijing intends to intervene in the Chinese stock market in order to prevent another dramatic collapse helped commodity currencies like the New Zealand Dollar recoup some of their recent losses on Tuesday. The ‘Kiwi’ gained on a number of its peers but could pare gains against the Pound if today’s UK growth data impresses.
With Canadian data in short supply and the collapse in commodity prices showing little sign of reversing, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was able to close out the local session trading in the region of a six-and-a-half year high. On Monday the price of crude oil slumped to a fresh three-month low, helping to drag an index of global commodities to a 13-year low.
South African Rand
At the beginning of the week the South African Rand slumped to a 14-year low against the US Dollar as emerging market currencies suffered as a result of the crash in the Chinese stock market. However, the Rand stabilised on Tuesday as investors looked ahead to tomorrow’s South African employment data, which is expected to show a decline in joblessness in the second quarter.