Daily Currency Update
The Pound prepared to close out the week trending in a broadly softer position having fallen back to 1.41 against the Euro and 1.54 against the US Dollar following a less-than-‘super’ Thursday. Hopes that the BoE would offer some kind of confirmation that interest rates are on course to be increased at ‘the turn of the year’ were dashed after the central bank cut its inflation outlook. The minutes from the BoE policy meeting added insult to injury by showing that only one of the nine-member Monetary Policy Committee voted in favour of higher borrowing costs as investors had been primed for a much more decisive split. If the UK’s trade data shows that the nation’s deficit widened, as forecast, Sterling could record additional losses before the weekend.
Friday saw the Euro gain on both the Pound and US Dollar in spite of disappointing German Industrial Production data. Output was shown to have fallen by -1.4% on the month in June rather than climbing the 0.3% forecast. This resulted in the annual figure falling from 2.4% to 0.6%. However, Germany’s trade numbers were better-than-expected and this helped buoy the Euro against its major peers.
With the highly influential US Non-Farm Payrolls numbers due for publication later today, the US Dollar is fluctuating against its rivals. The ‘Greenback’ registered declines against the Euro and Aussie but gained on the Pound. We can expect the US Dollar to slide during the local session if the US is shown to have added fewer-than-forecast positions or if average earnings in the world’s largest economy decline. Conversely, solid labour data has the potential to bolster Fed rate hike bets and send the US Dollar soaring.
After Reserve Bank of Australia (RBA) Governor Glenn Stevens implied that the central bank has no intention of cutting interest rates further in order to weaken the domestic currency, the ‘Aussie’ enjoyed a broad-based rally. The GBP/AUD currency pair fell to a low of 2.0997 before the weekend on the prospect of interest rates remaining on hold for the foreseeable future. Australia’s AiG Performance of Construction Index also edged slightly higher, although it remained in contraction territory, moving from 46.4 to 47.1.
New Zealand Dollar
As the RBA signalled that its rate cutting cycle might be over, bets that the Reserve Bank of New Zealand (RBNZ) will also leave borrowing costs on hold lent the ‘Kiwi’ some support and the commodity-driven currency edged up against several of its counterparts. Next week New Zealand will be publishing its Markit PMI and retail sales figures. As below-forecast results would put an RBNZ rate revision back on the table, investors will be monitoring the reports with interest.
Ahead of the release of Canada’s latest employment data, the Canadian Dollar was trending in a narrow range against the Pound and US Dollar. With the rout in the commodities market piling pressure on the ‘Loonie’, subpar domestic data has the potential to inspire further Canadian Dollar losses.
South African Rand
The South African Rand was trading fairly statically prior to the release of the US Non-Farm Payrolls report. With the pace of job creation forecast to slow, the emerging-market currency could be bolstered before the weekend if US rate hike expectations are undermined.