Daily Currency Update
In the immediate aftermath of the UK’s Consumer Price Index being published, the British Pound tumbled across the board. Sterling fell against the Euro and US Dollar as the annual rate of non-core UK inflation printed at -0.1% in September rather than holding at 0.0%. As the Bank of England has made it clear that interest rates aren’t going to rise until consumer price pressures pick up, this result left the Pound under serious pressure. The GBP/EUR exchange rate fell by 0.7% while the GBP/USD pairing lost almost 0.5%.
The US Dollar jumped against the Pound following the release of the UK’s latest inflation data but its performance elsewhere was more mixed as investors dwelt on the fact that the Federal Reserve may use recent below-forecast US data to justify leaving interest rates on hold until 2016. The only US report scheduled for publication today, the NFIB Small Business Optimism figure, is unlikely to have much of an impact on ‘Greenback’ trading.
Prior to the release of the ZEW Economic Sentiment data for the Eurozone and its largest economy, the Euro was trading up against the Pound and US Dollar. The common currency could extend gains if the report defies expectations for a significant decline in confidence in October, but given the recent Volkswagen scandal a dip in sentiment may prove unavoidable.
After China published trade data detailing a whopping decline in imports the Australian Dollar pared previous gains against a number of its rivals. The ‘Aussie’ held losses against the US Dollar and Pound despite the National Australia Bank (NAB) Business Confidence Index climbing from 1 to 5 in September. The NAB measure of Business Conditions held at 9.
New Zealand Dollar
As China’s trade data showed a sharp decline in imports, the New Zealand Dollar came under pressure during the Australasian session. Industry experts are also preoccupied with the expectation that the current appeal of higher-risk assets will ease and that the ‘Kiwi’ will tumble once focus returns to the Reserve Bank of New Zealand’s (RBNZ) interest rate plans.
The Canadian Dollar, like its commodity-driven peers, fell against the Pound in the wake of China’s trade numbers being published. Higher oil prices did limit the ‘Loonie’s losses however. Today’s UK Consumer Price Index (CPI) is likely to be the driving force behind GBP/CAD exchange rate movement in the hours ahead.
South African Rand
China’s disappointing trade numbers sent the emerging-market Rand lower against rivals like the Pound and US Dollar on Tuesday. With South African data lacking this week, global economic developments will continue to be the main cause of ZAR movement in the days ahead.