Daily Currency Update
Sterling was left trending lower across the board on Monday as the UK’s Markit Services PMI came in below forecast levels, fuelling concerns for the UK’s economic recovery and weighing on Bank of England (BoE) rate hike expectations. The Pound largely held these declines on Tuesday as the latest Halifax House Price report revealed a sharp monthly dip in values and annual New Car Registrations eased from 9.6% to 8.6% in September. Further Sterling movement may be limited ahead of Wednesday’s UK Industrial/Manufacturing Production data.
The common currency’s uptrend against peers like the US Dollar and Pound continued on Monday even as the Eurozone published some disappointing data. While the Services PMIs for Germany and the Eurozone were negatively revised from previous estimates, the Sentix Investor Confidence gauge fell by more than forecast and retail sales confirmed monthly stagnation. However, ecostats for the currency bloc were more encouraging this morning. Although German Factory Orders dropped unexpectedly, Retail PMI’s for Germany, France and the Eurozone as a whole showed improvement. The EUR/GBP and EUR/USD exchange rates edged higher accordingly.
Friday’s poor US jobs data continued weighing on the US Dollar at the start of the week, with the prospect of the Federal Reserve leaving interest rates at record lows for longer limiting demand for the ‘Greenback’. The currency consolidated previous losses after the US ISM Non-Manufacturing gauge revealed a sharper-than-forecast slowing in the pace of output in the nation’s most dominant sector. If today’s US trade balance report confirms the predicted widening in the country’s deficit, the ‘Greenback’ could slide further as trading progresses.
The Trans-Pacific Partnership trade deal helped the ‘Aussie’ capitalise on Friday’s NFP-inspired gains at the beginning of the week. The Australian Dollar enjoyed an additional rally against both the Pound and US Dollar after the Reserve Bank of Australia’s (RBA) interest rate announcement as the central bank not only refrained from cutting interest rates but also maintained a neutral tone on the subject of future fiscal policy.
New Zealand Dollar
Like its Australian counterpart, the New Zealand Dollar benefited from the TPP deal yesterday. Hopes that the move will shore up New Zealand’s flagging dairy industry, coupled with bets that the Federal Reserve will leave interest rates on hold at its October gathering, sent the ‘Kiwi’ higher against rivals like the Pound and US Dollar.
Rising oil prices and the successfully forged TPP trade deal gave the ‘Loonie’ a boost on Monday. Whether or not the Canadian Dollar’s uptrend will continue in part depends on how Canadian ecostats print over the next few days, with today’s Ivey Purchasing Managers Index potentially weighing on the ‘Loonie’ if it shows the decline forecast by economists.
South African Rand
The Rand was one of several emerging-market currencies to benefit from Friday’s poor US employment data and its subsequent impact on Federal Reserve interest rate hike expectations. The South African currency rallied all the way to 13.5243 against the US Dollar before later paring its advance.