Daily Currency Update
The Pound was trending above the 1.41 level against the Euro on Wednesday as the British currency held gains recorded following the publication of the UK’s second quarter growth data. The 0.7% quarter-on-quarter rate of expansion was a considerable improvement on the 0.4% growth figure recorded in the first three months of the year and supported both Bank of England (BoE) interest rate hike expectations and Sterling. Today’s UK Mortgage Approvals and Net Consumer Credit reports could be responsible for further Pound movement.
The Greek bailout talks resumed on Tuesday with a high security presence, but as no interesting news emerged from the discussions the Euro was left trading fairly statically against a number of its peers. The common currency did shed around a cent against the Pound in response to the UK’s GDP report however and could extend losses if today’s UK ecostats lend further support to the argument in favour of a sooner-rather-than-later increase of UK interest rates. The day’s only data for the Eurozone, Germany’s GfK Consumer Confidence Index, met forecasts for a reading of 10.1 and had little impact on demand for the Euro.
On Tuesday the US Dollar was pressured lower against several of its peers as a domestic Consumer Confidence report showed an unexpected drop in sentiment. The measure had been expected to come in at 100 in July but actually tumbled from a revised 99.8 to 90.9. With the FOMC announcement looming, the 'Greenback’ is primed for volatility during the North American session. Hawkish remarks from the Fed would drive the US Dollar higher, but any hints that the first adjustment of borrowing costs won’t be taking place until December are likely to see the ‘Greenback’ fall.
Struggling commodity prices kept the Australian Dollar trending bearishly as the week continued. Economists are envisaging additional declines in the price of both iron ore and coal, key Australian exports, and if values do continue to drop the Australian Dollar has the potential to fall as low as 50 cents against the US Dollar. Concerns relating to the Chinese stock market are also keeping the ‘Aussie’ under pressure and the South Pacific asset recorded declines against the Pound, Euro and US Dollar on Wednesday.
New Zealand Dollar
While profit taking drove the New Zealand Dollar higher at the beginning of the week, the dismal performance of major global commodities took a toll on the ‘Kiwi’ during the local session and the asset slid against a number of its major rivals. Upcoming domestic Buildings Permit data may lend the ‘Kiwi’ support if it shows improvement on the 0.0% figure recorded in June.
The Canadian Dollar continues to trade close to a six-year low against the Pound as falling crude oil prices lead some industry experts to bet that the Bank of Canada (BOC) might consider cutting interest rates again before the close of the year. The prospect of Friday’s Canadian growth data falling short of forecasts is also weighing on the commodity-driven asset.
South African Rand
With investors adopting cautious stances ahead of the FOMC interest rate announcement, the Rand was trending in a fairly narrow range against a number of its rivals. Today’s South African unemployment report could give the Rand a modest boost during the local session if it shows the decline in unemployment predicted by economists.