Daily Currency Update
Wednesday’s UK employment data helped the Pound recoup previous losses. The jobs data showed an increase in average earnings (albeit a smaller one than forecast) and an unexpected decline in the unemployment rate. With the report supporting the argument in favour of the Bank of England (BoE) still moving to increase borrowing costs in the first half of 2016, the Pound rallied across the board, moving back above 1.35 against the Euro and firming against the US Dollar. Sterling largely held these gains on Thursday and may experience limited movement in the hours ahead due to a lack of UK data.
The run of below-forecast US reports continued on Wednesday with the nation’s Advance Retail Sales report showing a smaller-than-projected increase in consumer spending. The 0.1% gain was half the 0.2% rise forecast and followed a negatively revised figure for August. Today’s US Consumer Price Index is expected to show that inflation fell into negative territory in September, a result which would weigh on US interest rate hike expectations and keep demand for the ‘Greenback’ limited.
Although the US Dollar softened as a result of pared back US interest rate hike expectations, the Euro failed to benefit from the currency’s decline and edged lower against several of its main rivals. Speculation that the European Central Bank (ECB) might look to increase quantitative easing was fanned as the rate of industrial production in the currency bloc slid on the month and came in lower-than-forecast on the year in August. New developments in the Volkswagen scandal also pressured the common currency.
Slightly disappointing Australian jobs data had a limited impact on the ‘Aussie’ during the Australasian session as investors chose to focus on the now incredibly slim odds of the Federal Reserve raising interest rates in 2015. Australia was shown to have lost -5.1K positions instead of adding the 9.6K jobs expected by economists but the AUD/GBP, AUD/USD exchange rates still opened Thursday’s European session in a stronger position.
New Zealand Dollar
Positive domestic data and US interest rate speculation helped the New Zealand Dollar post impressive gains against the majority of its currency counterparts overnight. The Business New Zealand Performance of Manufacturing Index climbed from 55 to 55.4 in September while the nation’s Consumer Confidence index rallied from 110.8 to 114.9. If New Zealand’s Consumer Price Index rose in the third quarter the ‘Kiwi’s uptrend could continue. However, sliding price pressures might increase the odds of a rate cut from the Reserve Bank of New Zealand (RBNZ) and weigh on the New Zealand Dollar before the weekend.
While the oil price rally hit a stumbling block this week, disappointing US data gave the commodity-driven ‘Loonie’ a lift against its rivals. Canadian data has been in short supply this week but the nation is set to publish its Existing Home Sales report later today. A positive result could help the Canadian Dollar stay bullish.
South African Rand
The Rand firmed as the local session got underway and demand for the US Dollar remained limited in light of Wednesday’s disappointing US retail sales data. The South African asset is likely to climb further in the hours ahead if the UK’s inflation report prints as expected.