Daily Currency Update
Thursday's fairly flat UK retail sales report had little impact on the Pound, with the currency largely holding the gains accrued on the back of Wednesday's surprisingly strong British employment figures. While Sterling rallied to a twenty-day high against the US Dollar after the Federal Open Market Committee (FOMC) left interest rates on hold, the same action sent the Euro broadly higher and GBP/EUR slumped back below 1.37. With little European news to focus on today we may see limited Pound movement before the weekend.
As forecast by the majority of economists, the Federal Reserve played it safe and left borrowing costs at record lows after its latest gathering. The decision sent the US Dollar trending lower against the Euro and as EUR/USD is one of the most traded currency pairs the Euro also advanced on several of its other major rivals. Today's current account data for the currency bloc could have a modest impact on EUR trading, but investors will also be looking ahead to the weekend and the Greek election. Any uncertainty generated by the vote could weigh on the Euro leading into next week.
Although the US building permits, housing starts and initial jobless claims figures came in better-than-forecast on Thursday, the US Dollar spent the European session edging lower as investors braced themselves for the most hotly-anticipated Federal Open Market Committee (FOMC) announcement of the year. However, in the end the decision was rather anticlimactic. As well as leaving interest rates at record lows, the Fed revealed that the number of policymakers calling for an interest rate adjustment before the end of the year had fallen, pushing rate hike bets back into 2016. The US Dollar dropped against rivals like the Euro and Pound following the announcement.
The FOMC interest rate decision renewed demand for higher-risk assets and the 'Aussie' advanced accordingly. Although gains were a little tempered by the Fed's references to the detrimental impact of the situation in China on the global economic outlook, the Australian Dollar is still approaching the weekend in a stronger position against the Pound and US Dollar.
New Zealand Dollar
The New Zealand Dollar followed its Australian relation higher on Friday as the news that US interest rates are likely to remain on hold until December bolstered commodity-driven currencies, although the 'Kiwi's uptrend was less notable than the 'Aussie's as the week's disappointing growth data for New Zealand restrained demand. There was some brighter economic news for New Zealand however, with the nation's consumer confidence index advancing from 109.8 in August to 110.8 in September.
While the FOMC announcement sent other commodity-correlated currencies higher, the Canadian Dollar initially slumped to an almost three-week low against the Pound following the announcement before recovering losses on Friday. 'Loonie' volatility may be on the cards today as Canada releases its Consumer Price Index for August. If inflation eases the Pound could recover yesterday's gains against its Canadian counterpart.
South African Rand
The Rand gained on both the US Dollar and Pound thanks to the Fed leaving rates on hold and was left trending in a fairly narrow range before the weekend. Next week South Africa is due to publish inflation data and the South African Reserve Bank will be delivering its interest rate decision. Both events are likely to have a notable impact on Rand trading.