Aussie currency update 5 July 2016
05 July 2016 by News DeskBank of England Governor Mark Carney today broadcast his latest currency update and reaction to market uncertainty.
For anyone watching the Aussie Dollar latest news of market movement is vital so here’s the latest currency update courtesy of currency specialists TorFX
Australian Dollar – The Australian Dollar recovered from weekend losses, which were linked to the country’s tight general election, and managed to reach another two-year high against the Pound on Monday.
Investors had shunned the ‘Aussie’ on fears that a hung parliament could lead to political instability. But the general consensus among markets was that the Reserve Bank of Australia would not slash rates this week in reaction to the political limbo and this stoked demand for the high-beta Antipodean currency.
New Zealand Dollar – Sterling succumbed to a new three-year low against the New Zealand Dollar yesterday as markets continued to flout the downtrodden UK currency in favour of assets offering better profit margins, such as the high-yielding ‘Kiwi’.
Currency update 5 July 2016
Extremely disappointing UK construction data hit policymakers like a hammer yesterday. Markit Economics reported that construction activity shrank to its lowest level since 2009 in June in response to fears surrounding the impact of the EU referendum.
A sharp reversal in residential projects and commercial activity brought the PMI down from 51.2 to a seven-year low of 46.0. The grim report, which was largely conducted before the ‘Brexit’ vote, showed that clients were reticent about commissioning new work in the run-up to the referendum.
Analysts noted that we could be treated to more downbeat reports of this nature now that the vote has taken place and firms are evaluating how ‘Brexit’ will impact their business models, according to the TorFX currency update.
Following the dire report, Tory leadership contender Stephen Crabb pledged to borrow £100 billion to create a ‘Growing Britain Fund’ if elected. The money would be spent on infrastructure such as flood defences, fibre optic broadband, transport, education and social housing.
The scheme invoked mixed emotions from political commentators: on the one hand the injection of cash would give the economy a sizable boost, but on the other it goes against six years of Conservative austerity.
Currency update 5 July 2016
Euro – The Pound to Euro exchange rate remained close to a two-and-a-half-year low yesterday as terrible construction figures painted a gloomy picture of the UK’s post-‘Brexit’ outlook.
However, the negative impact of the soft figures was partly offset by plans from UK Chancellor George Osborne to cut corporation tax from 20% to 15% in order to attract business investment and deter companies from relocating across the channel. Having previously cut corporation rates from 28% to 20%, Britain is already the cheapest place to do business in the G20, nearly half as expensive as the US rate of 39%.
The Eurozone retail sales report for May is due for release today and is expected to show a 1.7% expansion. However, the Bank of England’s financial stability report is likely to prove more impactful on GBP/EUR. If the central bank report features a downbeat assessment then the Pound could fall further against the single currency.
US Dollar – Sterling remained near 31-year lows against the US Dollar yesterday as British sentiment slid in reaction to the horrendous UK construction PMI results.
Despite the 18-cent depreciation in GBP/USD since referendum day, analysts expect the Pound to devalue by a further 10 cents during the second half of the year. They say the mixture of economic and political uncertainty offers too great a risk for traders, especially considering the Bank of England is likely to resume its stimulus programme over the summer.
This afternoon’s US data is anticipated to show a slight slowdown in private sector activity in June and a -2.2% dip in durable goods orders in May. However, the safe haven appeal of the ‘Greenback’ should insulate the US currency from any meaningful or lasting loses.
Canadian Dollar – Sterling struck a new two-and-a-half-year low against the Canadian Dollar yesterday as construction data showed that domestic demand took a huge hit in the build-up to the referendum vote.
Data from Canada showed that manufacturing output cooled from 52.1 to 51.8 in June but the ‘Loonie’ was not hurt by the result as the slowdown was nothing compared to the UK construction PMI, which plunged unexpectedly from 51.2 all the way to 46.0.
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