Pound Sterling (GBP) Supported by UK GDP, BoE Rate Hike Prospects
After a slow start to the week, the Pound was able to trim recent losses against the Australian and New Zealand Dollars and gain on both the Euro and the US Dollar following the publication of the UK’s second quarter growth data. The 0.7% quarterly rate of expansion was in line with economists’ projections and adds to the argument in favour of the Bank of England (BoE) looking to increase borrowing costs at around the ‘turn of the year’. The GBP/EUR exchange rate approached the 1.41 level after the report was released while the GBP/USD exchange rate brushed 1.56. If the week’s remaining UK reports are positive, we could see Sterling push higher still before the weekend.
Euro (EUR) Exchange Rate Supported by Reduced Grexit Fears, German Confidence Numbers
As a new week of trading got underway the Euro was able to advance on the majority of its currency counterparts as Greek bailout negotiations progressed and Germany published encouraging business confidence data. The odds of Greece leaving the Eurozone are now slimmer than they have been since Syriza came to power in January and hopes that the Hellenic nation is moving closer to recovery are likely to continue bolstering the common currency in the days ahead. That being said, ecostats from the Eurozone have begun to have more of an impact on the Euro now that the Greek furore has died down and the upcoming employment/inflation numbers for the currency bloc may spark some volatility.
US Dollar (USD) Currency Market Movement Depends on FOMC Announcement
On Monday the US Dollar declined against a number of its peers as investors speculated on the likely content of this week’s potentially influential Federal Open Market Committee (FOMC) interest rate announcement. Although the US published impressive Durable Goods Orders data, investors remained cautious amid concerns that the FOMC statement will dismiss a September rate revision and instead indicate that the first increase in borrowing costs is likely to take place in December. While the central bank commentary will be the week’s main cause of ‘Greenback’ movement, today’s US Markit Services PMI and Consumer Confidence index will also be of interest. Sentiment is believed to have increased while service sector output rose.
Australian Dollar (AUD) Recovers after Commodity Price Flop and Chinese Stock Market Crash
The ‘Aussie’ closed out last week struggling as a decline in the price of some of Australia’s key commodities weighed heavily on the South Pacific currency. A dramatic crash in the Chinese stock market piled more pressure on the Australian Dollar at the beginning of this week, but the currency was able to recoup some of its losses after the Chinese government pledged its commitment to stabilising the stock market. ‘Aussie’ gains also occurred as the US Dollar broadly softened ahead of the FOMC interest rate announcement. Later this week Australian Dollar fluctuations could occur in response to a speech due to be given by Reserve Bank of Australia Governor Glenn Stevens and domestic building permits data.
New Zealand Dollar (NZD) Shows Resilience Despite RBNZ Interest Rate Cut
The Reserve Bank of New Zealand’s recent decision to cut borrowing costs by 25 basis points actually helped the New Zealand Dollar move away from multi-year lows against peers like the Pound and US Dollar as many investors had been expecting a larger negative revision to take place. Although the ‘Kiwi’ did come under pressure as a result of faltering commodity prices, it showed remarkable resilience in the face of the Chinese stock market slump and advanced by almost 1% against the Pound on Tuesday in spite of the UK publishing encouraging domestic growth data. The New Zealand Dollar’s bullish run could come to an end however after RBNZ Governor Graeme Wheeler delivers a speech later today. If the speech indicates that the RBNZ has no intention of cutting borrowing costs further for the time being, the ‘Kiwi’ could extend gains. However, any hints that another rate cut is on the horizon would be New Zealand Dollar-negative.
Canadian Dollar (CAD) Softens as Crude Oil hits 3-Month Low
The Canadian Dollar was trending in a broadly softer position at the beginning of this week as the price of crude oil, Canada’s most important export, fell to a three-month low. Whether or not the ‘Loonie’ is able to move away from its recent over six-year low against the Pound largely depends on how Friday’s Canadian growth data prints. Given that Canada has posted four straight months of contraction, a figure of 0.0% or higher for May would bolster the Canadian Dollar while another negative reading would drive the commodity-currency lower.