Daily Currency Update
Tuesday’s disappointing UK inflation data left the Pound trending in a broadly weaker position, but the British currency was able to firm slightly ahead of the release of the UK’s latest jobs data. The employment report was mixed, with the UK unemployment rate falling unexpectedly but average earnings increasing by less-than-forecast and average earnings excluding bonuses sliding. Sterling fluctuated after the data was published but remained trending in a slightly stronger position against the Euro and US Dollar.
Bets that the Federal Reserve won’t look to hike interest rates in 2015 kept the ‘Greenback’ under pressure yesterday. Although the NFIB Small Business Optimism index showed improvement, China’s below-forecast inflation report was seen to be supportive of a global environment of loose fiscal policy. Today’s US Advance Retail Sales report is expected to show a 0.2% increase in consumer spending. Anything less than that would be US Dollar-negative, but stronger-than-anticipated result might give the currency a boost.
The ZEW Economic Sentiment surveys for Germany and the Eurozone may have shown a considerable decline in confidence in October but the Euro shrugged off the impact of the reports to remain trending in a stronger position against both the Pound and US Dollar. However, if economic reports for the currency bloc continue underwhelming and up the odds of the European Central Bank (ECB) expanding its quantitative easing programme, the Euro’s bullish run is likely to end. Today’s Industrial Production report for the currency bloc is expected to show an easing in output.
Although investors are concerned that rising Australian mortgage rates could push the Reserve Bank of Australia (RBA) into cutting borrowing costs, the Australian Dollar largely held gains recorded against the Pound following the UK’s inflation report. The ‘Aussie’ also strengthened against the US Dollar in the face of faltering US interest rate hike expectations.
New Zealand Dollar
With the odds of the Fed adjusting borrowing costs in October now extremely slim, the New Zealand Dollar advanced on its rivals and was little effected by China’s below-forecast Consumer Price Index. Ecostats for New Zealand have been in short supply this week, but upcoming manufacturing, confidence and inflation data could impact demand for the ‘Kiwi’ before the weekend.
China’s poor trade data sent oil prices lower and the Canadian Dollar faltered accordingly. The ‘Loonie’ extended losses against the Pound on Wednesday as the rate of annual inflation in China slowed by more-than-forecast. Given the absence of Canadian data today, commodity price shifts and US news will be the main cause of any Canadian Dollar movement.
South African Rand
An enthusiastic response to the possible sale of brewer SABMiller left the South African Rand trending higher on Wednesday, with the emerging-market asset climbing by more than 0.6% against the US Dollar.