Daily Currency Update
While the Pound was initially supported on Friday thanks to a better-than-forecast UK Construction PMI, Sterling later fell to its lowest level since May against the Euro. The declines in the GBP/EUR pair were triggered by the dismal US Non-Farm Payrolls report as the resultant surge in EUR/USD pushed the Euro higher across the board. The Pound was able to advance on a broadly softer US Dollar but gains were limited as investors bet the report would delay the Fed, and subsequently the Bank of England, from adjusting interest rates. This morning’s UK Services PMI could give the Pound a boost if it prints above the 56.0 level forecast.
Before the weekend the Euro surged after the US Non-Farm Payrolls report disappointed on all fronts. The less-than-impressive results slashed the odds of a rate adjustment taking place in October to just 10% and the common currency was able to romp higher against the US Dollar. In the hours ahead final Services/Composite PMIs for the Eurozone and its largest economies could impact Euro trading, but investors will also be focusing on the more influential Eurozone Sentix Investor Confidence index and retail sales report. Sentiment is expected to decline while retail sales growth is believed to have stagnated on the month in August.
The US Dollar dropped on Friday as the odds of the Federal Reserve increasing interest rates in October fell dramatically following the publication of the highly influential US Non-Farm Payrolls report. The data revealed that the US economy added considerably fewer positions than expected in September, with August’s figure also being negatively revised. Average earnings stagnated instead of increasing as forecast and the participation rate edged lower. All this translated to downward pressure on the ‘Greenback’ and the US currency fell against both the Euro and Pound. If today’s US ISM Non-Manufacturing Composite gauge shows the dip projected the US Dollar could fall further against its major rivals.
Although the poor US labour market report darkened the global economic outlook, commodity-driven currencies like the Australian Dollar were still able to gain off the back of revised Federal Reserve rate hike expectations. The ‘Aussie’ began the week little-changed against the Pound despite the AiG Performance of Service Index tumbling from 55.6 to 52.3. With the Reserve Bank of Australia’s interest rate decision looming, notable Australian Dollar movement can be expected this week.
New Zealand Dollar
Hopes that New Zealand’s dairy market will benefit from a new trade deal kept the ‘Kiwi’ supported at the end of last week. Although the New Zealand Dollar initially declined in the wake of the NFP release, the currency was able to recoup losses before the session closed. Ecostats for New Zealand to be aware of this week include the NZIER Business Opinion Survey and the nation’s Card Spending Figures. Data from China and the US will also be of interest.
While the ‘Loonie ‘ initially lost around half a cent against the Pound following the NFP report on Friday, the Canadian Dollar clawed back losses as trading progressed. The GBP/CAD exchange rate began Monday’s session trending in a narrow range but there are several Canadian reports for investors to sink their teeth into over the course of the week, not least Friday’s employment numbers for September, so the static trading may not last.
South African Rand
Friday’s poor US jobs data gave the emerging-market Rand a boost against its peers as the prospect of US borrowing costs remaining lower for longer increased the South African currency’s appeal. The Asian markets opening slightly stronger also contributed to the Rand’s uptrend. This morning’s South African Standard Bank PMI showed a decline from 49.3 to 47.9 in September but the result has so far had little impact on the Rand.