Daily Currency Update
Ahead of the Bank of England’s (BoE) interest rate decision the Pound was trending in a slightly stronger position against the Euro and holding steady against the US Dollar. Sterling weathered a batch of sub-par UK figures fairly well on Thursday, ceding little ground despite Manufacturing/Industrial Production figures falling short and the UK’s trade deficit swelling. However, the Pound may decline today if the minutes from the BoE’s policy meeting show that the central bank is inclined to leave borrowing costs on hold until beyond the first quarter of next year.
Positive UK house price data sent the Euro lower against the Pound on Thursday. Ecostats for the Eurozone have been in short supply since Wednesday but improved risk appetite has been weighing on demand for the common currency. Additionally, European Commission President Jean Claude-Juncker laid down the law ahead of the Greek election by stating that no renegotiations of the Greek bailout will be tolerated. Global economic developments are likely to be the main cause of Euro movement again today, although investors will also be looking ahead to tomorrow and the release of final German inflation data. The pace of consumer price gains is expected to be confirmed at 0.2% on the year in August.
As the European session opened the US Dollar was trending in a narrow range against the Pound but edged lower against the Euro. Wednesday’s only US reports, the MBA Mortgage Applications figure and JOLTs Job Openings numbers, were mixed, with mortgage applications falling -6.2% and jobs openings coming in at 5753 instead of the 5300 expected. However, as neither report is of particular note the results are unlikely to have an impact on next week’s Federal Open Market Committee (FOMC) interest rate decision. Today’s US initial jobless/continuing claims figures and Wholesale Inventories report may inspire some US Dollar movement if they defy forecasts.
After initially plummeting in response to the news that the Reserve Bank of New Zealand (RBNZ) cut borrowing costs, the ‘Aussie; staged an impressive rebound following the publication of positive Australian jobs figures. The Australian economy was shown to have added 17.4K positions in August, a significant improvement on the 5.0K prediction, and the unemployment rate dipped from 6.3% to 6.2%. China’s Consumer Price Index also rose by more-than-expected in August, with the annual inflation rate jumping from 1.6% to 2.0%, although the nation’s Producer Price Index fell short.
New Zealand Dollar
As forecast, the Reserve Bank of New Zealand (RBNZ) cut borrowing costs to 2.75% during yesterday’s policy meeting and the ‘Kiwi’ accordingly plummeted against the majority of its currency counterparts. The GBP/NZD exchange rate briefly achieved a high of 2.4552 but gave up some of its gains during the European session. However, any ‘Kiwi’ relief rallies may prove short lived as RBNZ Governor Graeme Wheeler asserted that further rate cuts are a possibility. Some positive news from the South Pacific nation came in the form of Card Spending data, which revealed a 0.5% month-on-month gain in August rather than the forecast 0.3% increase.
The Canadian Dollar gained on Wednesday as the Bank of Canada (BOC) refrained from cutting borrowing costs for a third time this year. The ‘Loonie’ advanced on both the Pound and US Dollar following the announcement and extended gains against Sterling on Thursday despite oil prices falling in response to China’s -5.9% Producer Price Index. The week’s last Canadian report, the nation’s New Housing Price Index, is scheduled for publication this afternoon and may prompt additional CAD shifts.
South African Rand
After hitting fresh record lows against the US Dollar last week, the Rand has spent the past few days gradually recovering losses against its North American peer. However, the South African currency’s modest uptrend ended on Thursday as China’s Producer Price index reignited Chinese growth concerns and limited demand for emerging-market assets.