Daily Currency Update
A positive assessment of the UK’s economic outlook from the International Monetary Fund (IMF) gave Sterling a boost on Tuesday and the British currency was able to brush the 1.36 level against the Euro on Wednesday after Germany published more disappointing data. The Pound extended gains against the majority of its peers as trading progressed on Wednesday and UK industrial production impressed. Month-on-month output of 0.3% had been forecast but a figure of 1.0% was recorded. Manufacturing production also rose by more-than-projected on the month.
The Euro dipped against a broadly strengthening Pound on Wednesday, with the common currency’s downtrend being exacerbated by Germany’s latest industrial production report. The pace of industrial output was shown to have plummeted by -1.2% on the month in August, wiping out the previous month’s positively revised gain.
On Tuesday the US trade deficit was shown to have widened by more than expected in August, the latest in a series of disappointing economic reports for the world’s largest economy. After the data was published the ‘Greenback’ remained under pressure against a number of its most traded currency counterparts, with the US Dollar failing to derive much benefit from rate-related comments issued by a Fed official. John Williams maintained a reasonably hawkish attitude on Tuesday, arguing that US interest rates should still rise this year.
A number of factors contributed to the ‘Aussie’s rally extending into Wednesday, including commodity price gains, the Trans-Pacific Partnership trade deal, the Reserve Bank of Australia’s (RBA) fairly neutral stance on borrowing costs and the reduced odds of the Federal Reserve increasing interest rates in October. Australian Dollar gains were only slightly tempered by the AiG Performance of Construction index dipping from 53.8 to 51.9 in September.
New Zealand Dollar
Another solid increase in dairy prices sent the New Zealand Dollar trending higher during the Australasian session. The ‘Kiwi’ gained on both the Pound and US Dollar as the improved prospects for New Zealand’s primary export increased the currency’s appeal. Notable ecostats for New Zealand are lacking until tomorrow when the nation’s card spending data will be published.
A 5% increase in the price of crude oil, Canada’s main commodity, bolstered the ‘Loonie’ on Tuesday and the currency shrugged off a disappointing domestic report. Canada’s Ivey Purchasing Managers index fell to 53.7 in September from 58.0 in August. Today’s Canadian data is forecast to print more positively, with building permits expected to have risen by 0.3% on the month in August following the -0.6% decline recorded in July.
South African Rand
Ahead of tomorrow’s South African Mining and Manufacturing Production data the Rand remained trading in a firmer position against the US Dollar and the Pound. Demand for the emerging-market asset has been elevated since Friday’s less-than-impressive Non-Farm Payrolls report pushed back Federal Reserve interest rate hike expectations.