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Posted July 26th, 2013 by Charles Purdy

Mixed fortunes for sterling | Smart Daily Currency Note

Last week            This week
(GBP/EUR – 1.1591)   GBP/EUR – 1.1583
(GBP/USD – 1.5229)   GBP/USD – 1.5376
(EUR/GBP – 0.8626)   EUR/GBP – 0.863
(EUR/USD – 1.3137)   EUR/USD – 1.3273
(GBP/AED – 5.5934)   GBP/AED – 5.6475
(GBP/AUD – 1.6601)   GBP/AUD – 1.6612
(GBP/CAD – 1.5786)   GBP/CAD – 1.5809
(GBP/CHF – 1.4346)   GBP/CHF – 1.4297
(GBP/HKD – 11.811)   GBP/HKD – 11.9272
(GBP/INR – 91.027)   GBP/INR – 90.611
(GBP/JPY – 152.24)   GBP/JPY – 152.02
(GBP/NZD – 1.9230)   GBP/NZD – 1.9056
(GBP/SEK – 9.9832)   GBP/SEK – 9.9463
(GBP/ZAR – 15.046)   GBP/ZAR – 14.96

Sterling

After maintaining an upward trajectory for most of last week, sterling experienced more mixed fortunes this week. The pound performed well from Monday as Prime Minister David Cameron announced that improving economic conditions may allow the Coalition Government to implement tax cuts in the near future. Varying levels of trader optimism were seen in the run up to the release of UK GDP figures, which came out yesterday and revealed that the UK economy grew by 0.6% in the second quarter. These figures largely conformed to key predictions, however the possibility still remains that the Monetary Policy Committee may vote in favour of further quantitative easing when they meet again in August and the figures did little to play down that possibility, causing sterling to drop sharply against the majority of its major peers. Additionally, revisions of previous GDP figures revealed that recession in the UK was in fact worse than first thought, which further contributed to sterling weakness. Overall, sterling has certainly plateaued to a degree after performing well last week and we will need to see further strong economic data coming from the UK to maintain hopes of a sustainable recovery, persuade investors that the Monetary Policy Committee will not loosen monetary policy in August. If they do it would weaken the pound. There is little data of note being released today, but further movement may be seen as traders take stock of the GDP data and react to on-going speculation regarding future increases in quantitative easing. Call your trader now to track sterling performance.

Euro

A reasonable strong week for the euro was topped off yesterday when a survey showed better-than-expected business confidence coming out of Germany. Earlier in the week we had strong manufacturing and consumer confidence data coming out of the 17-member state. All these factors are suggestions that the Eurozone may be on course for a slight recovery in the second half of the year, and confidence in the market is quietly building. These are still early days, however, and there is every possibility that the region’s six-quarter recession will continue and drag into a seventh. Today is fairly quiet data-wise in the Eurozone, with the only event of note is the import price statistics coming out of Germany. Get in touch for live euro rates.

US Dollar

As expected, the US dollar sensitivity to economic data has been magnified recently following comments from the Chairman of the Federal Bank expressed his commitment to an accommodative monetary policy and this has caused it to be another tough week for the dollar. Early weakness was experienced in response to worse than expected existing home sales data, causing the dollar to slide against the majority of its major peers and notably to trade at one month lows against sterling. Some positive figures were seen mid-week, with increases seen in new home sales and better than expected growth in the manufacturing sector, prompted a slightly better performance. A survey of leading economists released this week revealed that that around 50% of those surveyed believe that the Federal Open Market Committee (FOMC) would reduce the pace of bond-buying by $20 billion per month in September. Such a result would boost dollar performance in the medium term and as a result this survey had a positive effect, but a reduction is by no means assured at this stage and speculation will continue as further economic data comes through. Finally, yesterday’s Unemployment Claims data and Core Durable Goods Orders figures both fell short of expectations and failed to give the dollar a boost. Whilst medium term forecasts are still geared towards a US dollar recovery, we will need to see some improved data coming through before progress is made in the short term. The only real data of note coming in before the weekend is revised consumer sentiment data being released this afternoon by the University of Michigan. Call in now to see how the US dollar reacts to the latest data releases.

Worldwide

Elsewhere, the big mover early in the week was the Canadian dollar. The Canadian currency showed notable gains against the majority of its peers on Tuesday, with significantly better-than-forecast retail sales data injecting confidence into the Canadian market. This confidence continued, as the Canadian currency held steady through Wednesday, and gained further still yesterday off the back of oil price speculation. The New Zealand dollar, after a fairly weak day on Wednesday, was the standout performer yesterday off the back of the Reserve Bank’s interest rate decision. The rate was held at 2.50%, but investors were left with the impression that come the first quarter of 2014, rates could well be on the rise. The Japanese yen had a bit of a seesaw week, with demand for the low risk currency fluctuating as confidence in global stock markets wobbled. Today, inflation data out of Tokyo this lunchtime will be likely to have an impact on the Japanese yen. Otherwise, a fairly quiet day. Get in touch for the latest rates.

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