Daily Currency Update
Wednesday’s Sterling uptrend proved short lived and the British currency gave up gains against the Euro and US Dollar on Thursday as dovish Bank of England (BoE) policy meeting minutes were published. However, investors later brushed off the commentary and the GBP/EUR exchange rate edged above 1.36 on Friday. Today’s UK trade and construction reports could be responsible for further Sterling movement before the weekend.
A dovish stance from the Bank of England (BoE) and a lower-than-forecast US initial jobless claims figure helped the ‘Greenback’ recoup losses against the Pound prior to the release of the minutes from the last Federal Open Market Committee (FOMC) policy meeting. The minutes stressed that a September interest rate adjustment was deferred because of risks attached to the slowdown in China. As the minutes didn’t up the odds of October being the month for beginning policy normalisation, ‘Cable’ returned to the 1.53 level after their publication.
Germany’s trade report might have shown a narrowing in the nation’s surplus and a sharp slump in exports, but the Euro displayed resilience. The common currency spent much of Thursday’s session trending higher against the Pound as the Greek government won a vote of no-confidence, leaving parliament free to continue adopting the reforms outlined in the nation’s third bailout agreement. However, with some industry experts betting that the European Central Bank (ECB) will expand quantitative easing before the close of the year, Euro gains were limited.
On Thursday the Chinese stock market reopened after a week long holiday and investors were expecting a notable rally. However, the Shanghai Stock Index closed just 3% up, and the commodity-driven Australian Dollar fluctuated as a result. The currency has advanced on both the Pound and US Dollar this week thanks to firming commodities and reduced US rate bets, but if the Chinese stock market experiences more instability the ‘Aussie’ could see a reversal.
New Zealand Dollar
The New Zealand Dollar strengthened overnight as New Zealand published positive card spending figures. Retail card spending was shown to have increased by 0.9% on the month in September rather than the 0.4% forecast while card spending as a whole was up 0.7%.
Last week’s Canadian growth data showed expansion and the ‘Loonie’ has been on something of an uptrend ever since, aided by the TPP trade deal, rising oil prices and US rate hike speculation. Canadian data, while mixed, hasn’t had much of an impact on the currency but today’s domestic employment report will be of interest.
South African Rand
Prior to the publication of the FOMC meeting minutes, the Rand extended its weekly gain against the US Dollar to 3%, making up for a soft start to Thursday’s trading session as Fed rate hike expectations faltered. ECB meeting minutes also indicated that the European institution intends to keep borrowing costs on hold for the foreseeable future, fiscal conditions which will lend the Rand support.