Australian economy starts to suffer | 31/07/2013
Elsewhere, a big mover yesterday was the Australian dollar. A statement from the Governor of the Reserve Bank of Australia eluded towards a rate cut at the next policy-makers’ meeting, scheduled for the 6th of August. Following these comments the Australian currency fell against all of its 16 most-traded peers, and to the weakest level in three years against is US counterpart. The Indian rupee lost ground against all of its 31 most-traded peers, and hit 10-year lows against sterling. The big shift was in response to the central bank keeping interest rates unchanged and saying that steps taken to tighten cash supply this month will be rolled back. The Swedish krona also struggled yesterday after GDP data showed that the Scandinavian economy had contracted unexpectedly over the last quarter. Despite the news, markets remain confident that Sweden will recover in the coming months, with the economic situation in the euro zone, an important export destination, starting to show signs of life. Overnight we saw business confidence data out of New Zealand, and later on today we will have monthly GDP data out of Canada. Get in touch for live rates.
Will they/won’t they “taper” US quantitative easing soon | 31/07/2013
The US dollar remained flimsy yesterday ahead of a very data-heavy few days for the world’s largest economy. The dollar did strengthen against a weak sterling and spiked briefly against the euro before quickly relinquishing the ground it had made. Following the previously cautious approach from the Chairman of the Federal Bank with regards to the tapering back of the US bond-buying programme, investors appear reluctant to back the dollar before this evening’s Federal Open Market Committee statement. Should the Chairman’s comments suggest that a tapering back in the near future is likely then expect to see the dollar strengthen significantly, however it may continue to struggle if we see further hesitancy and commitment to an accommodative monetary policy. Tomorrow also sees the release of employment data alongside quarterly Advance GDP data during the afternoon. Changes in monetary policy will only be affected in response to an improvement in economic conditions and the second quarter GDP figures are sure to play a key part in this. Call your trader now to see if the Federal Reserve can spark a change in US dollar fortunes.
Positive economic data support the Euro | 31/07/2013
A further batch of positive data out of the euro zone meant that the euro logged another generally positive day, adding to the gentle momentum that the 17-nation currency has been building. Data released yesterday showed consumer confidence across the euro zone hit the highest levels in 15 months in July, reaching a rate of 92.5, up from 91.3 in June. The most notable results were seen in Germany, where levels were at the highest seen since September 2007. This continuing evidence suggests that the worst of the European recession has passed and is henceforth taking pressure of the European Central Bank to increase its easing policies. Today we have the release of monthly European inflation data, as well as unemployment statistics. Although the data is important, markets will have one eye firmly on Thursdays ECB meeting. Get in touch for the latest euro rates.
Sterling slides as we await Thursdays BoE meeting | 31/07/2013
It was a torrid day for sterling yesterday as it lost ground for the sixth day straight against the euro and experienced its greatest depreciation in two weeks against the US dollar. Traders seem to be betting against sterling ahead of tomorrow’s Monetary Policy Committee’s (MPC) meeting. Expectations are that the Bank of England will be relatively proactive in their policy decisions when compared to their counterparts in the US and the Eurozone. Whilst it seems unlikely that we will see an increase in quantitative easing at this stage (all 9 members voted against an increase last month) and the MPC has already expressed a commitment to keep interest rates low for the foreseeable future, investors will be paying close attention to the forward guidance issued as they look for hints as to what policy adjustments we can expect as we approach the autumn. The release will be key in determining sterling’s performance in the near future with a number of key figures predicting further sterling weakness. There is little in the way of important economic releases emanating from the UK today, however you can expect sterling to remain under pressure in the run up to Thursdays announcement. Call in now to track on-going market volatility ahead of Thursday’s events.
Euro remains tentative ahead of Thursdays rate decision | 30/07/2013
A quiet day for the euro yesterday. Markets are tentative ahead of the Central Bank’s rate decision on Thursday, and with no significant releases of data, the euro held ground against the majority of its peers. It lost ground against the US dollar, however, as markets speculate that the Federal Reserve will possibly announce plans to reduce stimulus later this week. Today should see a little more movement from the euro, with retail data coming out of German acting as a good inflation indicator, and quarterly GDP data coming out of Spain. However, expect markets to continue on a cautious note as we look towards Thursday’s rate decision.
Dollar shows gains against most major peers | 30/07/2013
The US Dollar appreciated against most of its major trading partners yesterday afternoon in response to better than expected Pending Home Sales data and increased speculation that the Federal Reserve will taper its bond-buying programme this autumn. Whilst the figures did reveal a decline, this decline was not as big as expected after reaching the highest level in over six years in June. Speculation surrounding a reduction in asset-purchasing came following better economic data and more positive data will further contribute to this trend. Crucially, the Federal Open Market Committee’s statement on Thursday is likely to go some way to encourage or discourage further speculation to this effect. In the meantime this afternoon’s Consumer Confidence data, another leading indicator of economic health, is likely to cause short-term market movement if figures differ greatly from expectations. Call your trader to see whether the dollar comeback is imminent.
Canadian Dollar keeps rising and Japanese Yen performs well | 30/07/2013
Elsewhere, the Canadian dollar had another strong day yesterday, rising for the third consecutive day and climbing against the majority of its major peers. The strong performance was down to crude oil, the nation’s biggest export, trading above $100 a barrel for the 18th day in a row. The performance is concluding a strong month for the Canadian currency, which has logged gains of 2.5% against its US counterpart this month. The Japanese yen was also a standout performer, with a 3% plunge in the Japanese stock index leading to a hike in demand for the safe haven currency. Strong monthly retail sales were also a catalyst for the yen’s strong performance. The New Zealand dollar struggled yesterday, losing out against the majority of its most traded peers, as the Prime Minister, John Key, claimed that it was ‘overvalued’ and that the government would welcome a slide. Overnight eyes were on Australia, with monthly building approvals statistics being followed by a statement from the central bank governor. Later today we have monthly raw material prices data out of Canada, a good overall inflation indicator. Get in touch for live rates.
Sterling slips as we await Thursdays BoE meeting | 30/07/2013
Sterling had a poorish day yesterday, weakening against the US dollar and against the euro. Positive data from the Confederation of British Industries revealed the first rise in UK retail sales for 5 months, benefitting sterling in the morning. Whilst these figures were better than expected, overall sales volumes are still relatively low and growth is expected to slow in August so the effect of this data was limited. Sterling fluctuated to a degree during the rest of the day, largely in response to events elsewhere. The Monetary Policy Committee’s August statement released on Thursday is likely to be the most influential release of the week as traders look to assess how much credence to give the notion of a sustainable recovery in the UK. Any hints as to alterations in monetary policy will impact significantly on Sterling performance as traders look to the statement for an indication of intent. There is little being released in the way of influential UK data between now and then so investor speculation and events elsewhere are likely to drive market movement. Call your trader now to monitor sterling performance.