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Aussie (AUD) Weakens on US Data, European and US Inflation Figures Ahead

07 August 2017 by FC Exchange

Last week was disappointing for the pound exchange rate which fell after hopes for higher interest rates in the UK were dashed, while the Aussie sank against the US dollar as positive Stateside data emerged, say industry experts FC Exchange.

Pound (GBP)

Last Week

Last week was manic for the pound and markets watched as the British currency eventually gave up gains to the majority of its currency counterparts. While the week started positively with a surprise uplift in manufacturing activity, a combination of weak data and a disappointing Bank of England (BoE) interest rate decision saw sterling slip. As inflation faltered earlier in the month, for the first time since October, speculation from markets was rife that any chance of an interest rate hike in the UK had slipped away. This was further established midday Thursday as policymakers voted on monetary policy and only two members of the Monetary Policy Committee (MPC) called for higher rates, down from three last month. BoE Governor Mark Carney’s subsequent meeting also saw the announcement that growth had been revised lower for both 2017 and 2018. The pound fell against nearly every currency as a result.

The Week Ahead

Last week saw Brexit developments fall by the wayside as the pound lost so much strength from data and BoE announcements. It’s possible that the pound is more vulnerable in the aftermath of the weak ecostats and BoE decision and therefore any negative press about Brexit could pressure sterling significantly lower.

Euro (EUR)

Last Week

The euro had a great start to the previous week as the currency bloc’s unemployment rate fell to an eight-year low. Also, better-than-expected inflation and retail sales figures were released. The continued run of robust data from the Eurozone has led to speculation that the European Central Bank (ECB) may soon announce the scaling back of its extensive asset purchase programme.

The Week Ahead

It is a particularly quiet week of data for the Eurozone with most of the more notable releases coming at the start of the week and are mainly out of Germany. On Tuesday morning German imports, exports, current account, and trade balance data will all be released at 7 am UK time. Friday will round off the week with many inflation figures for some of the major Eurozone members.

US dollar (USD)

Last Week

The USD also had a volatile week of trading alongside its currency counterparts as politics dominated early on, only for the week to close with unexpectedly positive non-farm payroll figures. President Trump fired another head of staff which caused the US dollar to slowly weaken against its peers, only to strengthen back on the labour market stats which printed at 209k rather than the 183k expected. The data saw a rise in the value of the USD almost immediately.

The Week Ahead

The big data of note this week will be inflation figures due out on Friday and producer price index (PPI) numbers on Thursday. However, it’s sometimes the unforecast events and developments that take place that have the biggest impact on the currency market. Therefore, if President Trump decides to make more adjustments to his staff or makes any snap decision, the USD could respond dramatically.

Swiss Franc (CHF)

The Swiss franc noted a significant fall against other majors last week, particularly the euro. While the single currency was buoyed by optimistic economic data, the safe-haven franc became less appealing to investors. In the last week of July, the Swiss franc exchange rate slid 4% against the euro.

Australian Dollar (AUD)

The Reserve Bank of Australia (RBA) has stated on many occasions that the Australian dollar is significantly overvalued, and therefore the fall in the Aussie’s strength at the end of last week would have been welcomed. The Australian dollar fell against it’s US dollar counterpart as US jobs data offered the American currency a boost. The Aussie is one of the best Group of Ten (G-10) majors in recent months, behind the euro and the Swedish Krona. Some industry experts believed it’s recent rally has led it to levels beyond a reasonable value and that it can’t be pushed any higher, meaning that a fall in the Australian currency could happen in the near future.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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