Daily Currency Update
With the rate of annual UK inflation returning to 0%, the Pound spent much of Tuesday trading in a slightly softer position against peers like the Euro and US Dollar. ‘Cable’ remained below technical resistance in spite of the US releasing a stream of disappointing reports, including a lower-than-expected Advance Retail Sales result. While Sterling could stage a rebound today if UK employment numbers impress, subpar figures have the potential to send the currency spiralling lower.
A mixed batch of ecostats for the Eurozone resulted in muted Euro trading yesterday. While the ZEW economic sentiment reports for Germany and the currency bloc revealed a worrying decline in confidence, the Eurozone’s quarterly employment report printed at 0.3% in the second quarter, up from 0.1% in the first. While today’s inflation figures for the Eurozone will be of interest, they’re unlikely to have much of an impact on the ECB’s plans to expand quantitative easing unless they print substantially higher or lower than forecast. As the local session opened the common currency registered notable declines against the Australian and New Zealand Dollars and dipped against the Pound and US Dollar.
Yesterday’s US data (including Advance Retail Sales, Industrial Production and Manufacturing Production numbers) may have fallen short of the mark, but the US Dollar was able to shake off any adverse impact ahead of the Federal Open Market Committee’s (FOMC) interest rate decision. The US Dollar strengthened against both the Pound and Euro and may extend gains later today if the US Consumer Price Index shows that annual inflation held at or exceeded 0.2% in August. The rate of core inflation is expected to have improved from 1.8% to 1.9%.
With trading conditions fairly calm prior to the hotly anticipated FOMC interest rate announcement, the Australian Dollar was able to gain on peers like the US Dollar and Pound during the Australasian session. Bets that the recent run of disappointing US data will prevent the Fed from raising interest rates on Thursday meant that the ‘Aussie’ held gains even after the domestic Westpac Leading Index registered a -0.3% monthly decline in August.
New Zealand Dollar
A surge in the price of New Zealand’s primary export helped the ‘Kiwi’ rally across the board overnight. Dairy prices increased for a third consecutive auction, leading some industry experts to positively revise their projections for Fonterra Cooperative Group’s payout to local farmers. New Zealand’s current account data also revealed a narrower deficit than expected, with the shortfall coming in at -1.22 billion New Zealand Dollars in the second quarter rather than the -1.50 billion New Zealand Dollars expected.
As US data weighed on Fed rate hike expectations and domestic data printed well, the Canadian Dollar strengthened against the Pound and US Dollar yesterday, with the commodity-driven currency extending gains on Wednesday. Canadian Existing Home Sales came in at 0.3% on the month in August following a -0.4% decline in July. Canadian data to look out for today includes the nation’s Manufacturing Shipments report.
South African Rand
As the Federal Open Market Committee (FOMC) convened to begin its much debated two-day policy meeting, the South African Rand was trading fairly statically. The asset is liable to experience some fluctuations in the hours ahead as South Africa publishes its Retail Sales numbers for July. A monthly sales gain of 0.7% has been forecast.