Daily Currency Update
After Tuesday’s domestic data revealed British manufacturing growth slowed in August, despite predictions output would expand, the Pound Sterling declined versus many of its currency rivals. The depreciation was somewhat slowed, however, thanks to comments made by Bank of England (BoE) Governor Mark Carney on Monday. Carney stated that the current situation in China will not cause a rate hike delay given the UK’s minimal ties to the Far East nation. In the early stages of Wednesday’s European session the British asset is generally edging lower versus its major peers as traders await construction data.
China’s equity market finished the Asian session having recovered over 4% of the losses seen in recent weeks. This is an indication that Beijing, once again, intervened with state-backed capital. The result has seen trader risk-sentiment improve significantly, which dampened demand for the single currency. Additional Euro losses can be linked to concerns that price pressures will cause the European Central Bank (ECB) to expand quantitative easing. Wednesday’s European session is likely to see shared currency movement as a result of market sentiment and developments in China, with Eurozone Producer Prices data unlikely to have a significant impact.
After posting mixed results from domestic data publications on Tuesday, the US Dollar fluctuated versus its rivals. A slight appreciation can be linked to demand for safe-haven assets amid growing concerns regarding China’s slowing economic growth. In the early stages of Wednesday’s European session the ‘Greenback’ (USD) is trending lower versus its major competitors thanks to cooling demand for safe-haven assets. In addition recent dovish comments from Federal Reserve officials, with regards to rate rise caution in the face of a global economic slowdown, are causing a headwind against Dollar gains.
Australian growth data, released during the Australasian session, failed to meet with expectations. On a quarterly basis, Australia’s Gross Domestic Product advanced by just 0.2%; only half the median market forecast 0.4% second-quarter growth. On an annual basis, second-quarter GDP advanced by 2.0% which failed to meet with the market projection of 2.2%. However, despite the disappointing growth figures the ‘Aussie’ (AUD) is trending higher versus many of its currency rivals in the early stages of Wednesday’s European session. This is due to Beijing’s intervention in China’s equity market and the resultant improvement to risk-appetite.
New Zealand Dollar
In addition to improving market sentiment causing ‘Kiwi’ (NZD) gains during Wednesday’s European session, rising dairy prices aided the uptrend. The Global Dairy Trade (GDT) auction saw volumes drop which caused prices to spike. However, there are still concerns regarding weak demand with China’s economic struggles weighing on New Zealand’s exports.
Oil prices have been particularly volatile of late which has caused the Canadian Dollar to fluctuate considerably versus its peers. Tuesday saw oil end the biggest three-day rally since 2009 which weighed on ‘Loonie’ (CAD) gains. Mixed results from domestic data also weighed on demand for the Canadian asset. Whilst growth figures bettered estimates, manufacturing output dropped into contraction territory. Crude prices have declined again on Wednesday morning thanks to profit-taking after the steep rise opened up some attractive selling positions. Despite the oil price drop, however, the ‘Loonie’ edged higher versus some of its major peers. This is due to improving market sentiment and expectations that oil prices will rise once the spate of profit-taking ends.
South African Rand
Although China’s equity market ended the session in a comparatively strong position, many emerging-market currencies are still feeling the pinch. This is mainly due to fears that the fallout from China’s economic slowdown may have a greater impact on those economies with less contingency for dealing with financial crises. The South African Rand was trending lower versus most of its major peers during Wednesday’s European session.