Daily Currency Update
Remarks from Monetary Policy Committee (MPC) member Kristin Forbes sent the Pound trending higher on Monday. The BoE official warned that keeping borrowing costs at record lows for too long could prove damaging to the domestic economy and this hawkish signal saw Sterling advance above 1.41 against the Euro and 1.5650 against the US Dollar. This morning’s Rightmove House Price report showed a -0.8% month-on-month decline in property values but the release had little impact on the Pound ahead of tomorrow’s UK Consumer Price Index.
To the relief of many, European parliaments voted in favour of Greece receiving its third bailout at the close of last week. However, despite sentiment toward the Hellenic nation improving off the back of this development, a set of disappointing growth figures for the Eurozone and its largest economies saw the Euro slip against a number of its rivals. The currency bloc as a whole was shown to have expanded by just 0.3% in the second quarter of 2015. Today’s trade balance numbers for the Eurozone are likely to cause some fluctuations in demand for the common currency.
Friday’s US industrial production data impressed but despite the fact that the Federal Reserve has frequently asserted that domestic data will drive the path of US interest rates, the report failed to lend the ‘Greenback’ much support. Investors were more concerned with an unexpected dip in August’s University of Michigan Confidence index, with the sentiment gauge slipping from 93.1 to 92.9. With the US set to publish its latest inflation stats and the minutes from the last Federal Open Market Committee (FOMC) policy meeting, notable ‘Greenback’ volatility can be expected over the next few days.
Last week commentary from the Reserve Bank of Australia (RBA) helped allay concerns that the central bank would cut borrowing costs again before the close of the year. However, after the People’s Bank of China (PBoC) devalued the Yuan three times in three days, rate cut concerns returned and the Australian Dollar fell back to trending close to a multi-year low against the Pound. Tomorrow sees the publication of the RBA meeting minutes. A hawkish set of minutes would be Aussie-supportive, but any references to the impact the slowdown in China may have on Australia’s economic output would weigh on the South Pacific currency.
New Zealand Dollar
Less-than-impressive retail sales figures for New Zealand left the ‘Kiwi’ struggling at the tail end of last week and the commodity-driven currency came under additional pressure after the domestic Performance of Services Index for July printed at 56.5, down from 58.1 in June. If New Zealand’s data doesn’t start impressing soon, the odds of the Reserve Bank of New Zealand (RBNZ) cutting borrowing costs again will climb and the New Zealand Dollar could fall to fresh lows.
The downtrend in crude oil prices continued limiting demand for the ‘Loonie’ last week and the threat of additional policy loosening from the Bank of Canada (BOC) is likely to ensure that the commodity-driven currency remains under pressure against rivals like the Pound and US Dollar for the foreseeable future. Influential Canadian data is lacking until Friday when the nation is set to publish both inflation and retail sales figures, but news from the US and commodity-price shifts will have an impact on demand for the ‘Loonie’.
South African Rand
The prospect of strike action in South Africa’s gold mining sector, coupled with fluctuating sentiment regarding the possibility of the Federal Reserve introducing higher borrowing costs this year, left the Rand trending at its worst ever rate against the Pound and a fourteen-year low against the US Dollar. This week’s South African inflation data is likely to prove a catalyst for ZAR volatility.