Daily Currency Update
Despite there being a notable lack of UK data on Thursday, the Pound still managed to approach the 1.43 level against the Euro thanks to some unhappy grumblings from Greece. The GBP/USD currency pair, however, fell back below 1.56 as the US GDP report confirmed acceleration in the second quarter (albeit at a slightly slower pace than projected) which led to some investors bringing forward their Federal Reserve interest rate hike expectations. Sterling softened slightly against several of its major peers on Friday following the release of the GfK Consumer Confidence Survey for July, as the index unexpectedly slid from 7 to 4.
A number of factors led to the Euro’s downtrend on Thursday, including below-forecast German inflation/employment figures and hints that Greece intends to hold an internal referendum so that members of the Syriza party can vote on the austerity conditions attached to the nation’s third bailout. The International Monetary Fund (IMF) also expressed concerns relating to Greece’s suitability for securing a third round of funding. The common currency remained lower against the US Dollar on Friday as German retail sales unexpectedly plummeted by -2.3% on the month. A 0.3% gain had been anticipated.
Although the US second quarter GDP report showed that the world’s largest economy expanded by slightly less-than-projected in the second quarter (posting annualised growth of 2.3% rather than the 2.5% anticipated) the fact that first quarter GDP was positively revised to 0.6% was well received and led to slightly improved Federal Reserve interest rate hike expectations. The US Dollar accordingly gained on the majority of its currency counterparts. Today’s final University of Michigan Consumer Confidence survey could lend the ‘Greenback’ additional support if it shows the positive revision anticipated by economists.
The ‘Aussie’ was left trending lower across the board as commodity prices continued to struggle and domestic Private Sector Credit came in lower-than-expected. With the Reserve Bank of Australia (RBA) delivering its interest rate decision next week, the ‘Aussie’ could be in for further volatility. Any hints that an interest rate cut is looming would weigh on the South Pacific currency.
New Zealand Dollar
Improved Federal Reserve interest rate hike expectations reduced demand for higher-risk assets during the local session and the New Zealand Dollar came under further pressure after the NBNZ Business Confidence Index plummeted from -2.3 to -15.3 in July. The nation’s Activity Outlook index also slumped from 23.6 in June to 19.0 in July, putting further pressure on the already struggling ‘Kiwi’.
Ahead of the publication of Canada’s latest growth figures, the Canadian Dollar was trading in a broadly softer position as investors repositioned themselves in response to the US GDP report. Should today’s Canadian growth data exceed expectations, the ‘Loonie’ could gain. However, a disappointing result is likely to have a damaging impact on the commodity-driven Canadian Dollar.
South African Rand
Expectations for a September rate revision from the FOMC saw the South African Rand hit a fresh 14-year low against the US Dollar on Thursday. The currency’s bearish relationship with its peers looks set to continue for the foreseeable future.