Daily Currency Update
Ahead of the release of the UK’s Consumer Price Index the Pound was trending in a slightly softer position against a number of its currency rivals. The asset initially advanced on Monday in response to hints from Bank of England (BoE) policymaker Kristin Forbes that interest rates need to be raised soon in order to safeguard the UK’s economic recovery. However, investors later focused on her cautionary remarks relating to the impact of a strong domestic currency and the recent intervention in China and Sterling gave up gains. If today’s UK CPI prints below 0.0% we could see the Pound tumble in the hours ahead.
The Euro experienced a fairly static trading session on Monday as concerns the German parliament might delay Greece receiving its third bailout outweighed the positive impact of the aid gaining the approval of the Greek parliament and European finance ministers. A lack of ecostats for the Eurozone could limit Euro movement as trading continues but if the three nations scheduled to vote on the Greek bailout today (Spain, Estonia and Austria) pass the measures the common currency may post modest gains.
Concerns relating to the latest US inflation numbers gave the ‘Greenback’ the opportunity to advance on the Pound at the beginning of the week. However, US Dollar gains were tempered by a dramatic slide in the US Empire Manufacturing gauge, which plummeted from 3.86 to -14.92 in August instead of rising to 4.5 as expected. Other US data was more positive, with the NAHB Housing Market Index coming in at 61 as forecast. The day’s US ecostats, Building Permits and Housing Starts numbers, could have an impact on Greenback trading ahead of tomorrow’s FOMC minutes.
During the Australasian session the ‘Aussie’ fell across the board despite the minutes from the Reserve Bank of Australia (RBA) adopting a more sanguine tone on the subject of the strength of the domestic currency. The Australian Dollar edged lower against the Pound, Euro and US Dollar as the minutes indicated that the AUD/USD pairing is likely to slide once the Fed adjusts borrowing costs. Australia’s New Motor Vehicle Sales also dropped by -1.3% on the month in July, resulting in a dip in the annual figure from 4.0% to 3.7%.
New Zealand Dollar
After falling to within touching distance of a fresh six-year low against the Pound on Monday, the ‘Kiwi’ staged a modest rally off the back of hopes that dairy prices might rebound following their recent dramatic decline. New Zealand’s upcoming Producer Prices Inputs and Outputs data for the second quarter might cause New Zealand Dollar fluctuations, but commodity price shifts and developments in the US are likely to be of greater interest.
Although the ‘Loonie’ slumped early in Monday’s European session, the Canadian Dollar romped higher against the Pound during the afternoon as investors became preoccupied with this morning’s UK inflation data. With Canadian reports in short supply for the first half of the week the Canadian Dollar will be subject to movement inspired by developments elsewhere.
South African Rand
With some investors betting that this week’s Federal Open Market Committee (FOMC) meeting minutes will be hawkish in tone, the South African Rand slumped to a fresh 14-year low against the US Dollar. The Rand also remained trading in the 20.1200 region against the Pound, although the South African currency may recoup losses if today’s UK inflation data disappoints.