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Australian Dollar falls against Sterling

19 August 2016 by News Desk

The Australian Dollar fell back as the Pound advanced by over half a cent against the ‘Aussie’, thanks to the UK’s solid retail sales report.

Australian DollarAustralian Dollar suffered from continued slippage of the price of iron ore (still holding above US$60 per tonne) which caused the Australian Dollar to lose some of its recent appeal, according to currency specialists TorFX

The Australian Dollar was also impacted by a strengthening of the Canadian Dollar due to higher oil prices and a general increase in demand for non-risk-correlated currencies.

As the US Dollar recovered on Friday, the Australian Dollar was undermined and allowed GBP/AUD to climb.

New Zealand Dollar (NZD) – The New Zealand Dollar advanced against its other commodity-correlated peers on Friday, but was unable to take this strength against other majors due to a market-wide movement against risky investments.

The ‘Kiwi’ was likely strengthened thanks to the week’s solid dairy news, as well as Friday’s data indicating an improvement in credit card spending. Regardless, Sterling was able to hold near its best weekly levels against the ‘Kiwi’ on Friday despite fluctuations.

Australian Dollar falls against Sterling

Pound Sterling (GBP) – The Pound surged on Thursday as the day’s retail sales data defied post-Referendum expectations, leading to broad-based GBP gains.

According to the report from the Office for National Statistics (ONS), sales were up 1.5% in July compared to June, well above the projected score of 0.1%. Many analysts had anticipated that the Brexit vote would have undermined the confidence of buyers, but hot July weather and an increase in tourism led to an unexpected surge in sales. The year-on-year score improved from 3.9% to a high 5.4% as a result.

Some analysts have suggested that if the current trend of buying keeps up for the remainder of 2016, it could help the UK economy avoid a recession. It could also persuade the Bank of England (BoE) to avoid introducing further stimulus measures.

However, as the factors that boosted sales in the first place, such as hot weather and tourism, understandably fade in future months, the previously feared post-Referendum retail sales drop could still occur. On Friday morning, the Pound slipped from its best levels. Friday’s UK public sector net borrowing report beat expectations, but did little to send the Pound higher.

US Dollar (USD) – The Pound soared against the US Dollar on Thursday, hitting its highest levels since the first week of August as Sterling advanced while the US Dollar weakened once more. As of Friday however, the US Dollar was attempting a recovery.

Federal Reserve rate hike bets have continued dropping throughout this week, causing the US Dollar to plunge as investors sought out higher yields. Wednesday’s split Federal Reserve meeting minutes caused bets to fall even lower, with markets becoming increasingly certain that 50 basis points of interest rate hikes would be impossible in 2016.

However, Thursday’s latest US jobless claims report may have boosted the US Dollar slightly. Less than expected new jobless claims were made, with only 265k coming in throughout the week. This marked the 76th week where the number of new claims was below 300k, the longest stretch under this threshold since 1973’s much smaller labour market.

Euro (EUR) – The Euro held its ground on Thursday and was able to advance slightly against the Pound after its morning surge, thanks to a mixed inflation report and minutes from the European Central Bank (ECB).

The Eurozone’s July Consumer Price Index (CPI) came in at -0.6% month-on-month, but the yearly score of 0.2% was optimistic to some analysts and indicated that the bloc had continued to avoid deflation – despite inflation remaining ultra-low.

The low inflation figure has been the latest indication to some economists that the ECB’s Quantative Easing (QE) measures may not be as effective as hoped. However, the ECB minutes revealed that despite all the downside risks the bank would not rush into introducing new easing measures, exercising cautious optimism.

Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate attempted to edge higher on Friday after the ‘Loonie’ fought back from Thursday’s Sterling surge. GBP/CAD advanced over a Dollar after the publication of Britain’s July retail figures, but a continued rally of oil prices allowed the Canadian Dollar to take back some of these losses. While Sterling has edged up since due to a drop in appetite for risky-currencies, GBP/CAD has failed to return to that brief Thursday high.

Prices of oil continued to impress on Friday morning. Canada’s most lucrative commodity hit a two-month high after reaching US$51.22 per barrel. The commodity’s prices have been trending upward since early August, but this was not enough to help the ‘Loonie’s advance on Friday as Canadian investors awaited the day’s Canadian retail sales and inflation scores.

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