Daily Currency Update
Yesterday’s Bank of England (BoE) policy meeting saw the central bank leave borrowing costs on hold, as expected. However, the minutes from the gathering indicated that while policymakers are keeping a wary eye on developments in China, they don’t currently anticipate the situation having a material impact on the UK’s economic outlook. The minutes were taken to mean that the BoE may still hike borrowing costs at around the turn of the year and the Pound advanced accordingly. Gains were limited however as a proportion of analysts still anticipate record low interest rates remaining in place for around a year. Today’s UK Construction Output figures and BoE 12-Month inflation outlook could cause further Sterling movement before the weekend.
Eurocentric data was lacking again yesterday, limiting the common currency’s movement and causing investors to dwell on the upcoming Greek election. This morning the Euro edged higher against the majority of its currency counterparts as Germany’s final inflation figures confirmed static consumer prices on the month and an annual 0.2% gain. As the European Central Bank (ECB) recently inferred that it may extend quantitative easing in order to boost domestic inflation, the fact that the figures weren’t negatively revised (which would up the odds of an extension) was positively received.
Thursday’s US ecostats gave the US Dollar a bit of a negative bias and helped ‘Cable’ climb by more than 100 pips to achieve a two-week high. The US initial jobless claims figure met forecasts, while the Wholesale Inventories number dipped -0.1% in July rather than rising the 0.3% expected. The result for June was also negatively revised to 0.7%. The US Dollar could edge lower still this afternoon if the University of Michigan Confidence Index for September declines from 91.9 to 91.1 as forecast.
The ‘Aussie’ surged on Thursday thanks to an encouraging domestic employment report. Although the South Pacific currency pared gains as European trading progressed on Friday, the Australian Dollar is still in line to post its biggest five-day gain against the US Dollar for almost 20 months. A number of Chinese reports and the minutes from the Reserve Bank of Australia’s (RBA) last policy meeting are due out next week, which means the ‘Aussie’ is likely to experience some volatility.
New Zealand Dollar
As the Reserve Bank of New Zealand (RBNZ) not only cut interest rates on Wednesday but hinted that another revision could be on the cards, the New Zealand Dollar plummeted against rivals like the Pound and US Dollar. The ‘Kiwi’s weakness looks set to persist into the weekend despite New Zealand’s Performance of Manufacturing Index printing at 55.0 in August, up from 53.7 in July.
After rallying on Wednesday after the Bank of Canada (BOC) refrained from cutting interest rates, the ‘Loonie’ steadily softened on Thursday and gave up further gains on Friday. While this week has been fairly quiet in terms of Canadian data, next week is looking slightly busier with Canadian Manufacturing Shipments and inflation figures having the potential to initiate Canadian Dollar fluctuations.
South African Rand
With domestic mining and manufacturing production data exceeding forecasts, the Rand was able to advance on the US Dollar on Thursday. While the South African currency gave up some of these gains before the weekend, a top forecaster projected that signs the Rand selloff was overdone could see the currency stage a rebound in the near future.