Australian Dollar suffers loss
07 September 2016 by News DeskAustralian Dollar to Pound exchange rate briefly recovered on news that rates will stay at 1.5%,
Australian Dollar experienced a more definite loss in value however following the publication of the August US Non-Manufacturing report from ISM, according to currency specialists TorFX
This led to a spike in demand for risk-correlated currencies like the Australian Dollar, as bets of a Federal Reserve rate hike dropped.
Tuesday’s RBA policy meeting was the last to be held by outgoing RBA Governor Glenn Stevens, as he will step down in mid-September after 10 years in the role. The Australian Dollar reflected feelings at the meeting which adopted a tone used many times before by the RBA, indicating a quiet confidence in current monetary policy.
New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate was undermined by a number of factors on Tuesday, and continued to slide on Wednesday morning as the ‘Kiwi’ Dollar led the pack in this week’s risk rally.
The latest disappointing US ecostats led to a drop in Fed rate hike bets, as well as lowering interest in the US Dollar itself.
Investors instead looked towards riskier, higher-yielding currencies, and due to recently solid economic and commodity news, the New Zealand Dollar was ripe for the picking. Tuesday’s report that dairy prices had increased once more to levels not seen since March 2015 also bolstered the appeal of the dairy-correlated ‘Kiwi’.
Australian Dollar suffers loss
Pound Sterling (GBP) – The Pound fluctuated higher against most of its major rivals on Tuesday but struggled to capitalise as a shift in focus towards the US Dollar drew investors away from Sterling.
The past week’s data, including impressive August Manufacturing and Services PMI, continue to be the basis of the Pound’s current strength. This has also caused bets of further Bank of England (BoE) stimulus to drop slightly.
In fact, according to a Reuters poll economists believe there is only a 10% chance of a September BoE rate cut. On the other hand, analysts still believe there is a solid chance of further cuts as soon as November, meaning Sterling’s current strength is likely to be limited and may prevent the Pound advancing much further.
Wednesday’s Gross Domestic Product (GDP) estimate from NIESR will indicate how British growth is progressing in August and could offer Sterling some strength if it beats expectations.
US Dollar (USD) – The Pound to US Dollar exchange rate surged on Tuesday afternoon, continuing its successive series of advances on the back of underwhelming US data.
Following last week’s disappointing Manufacturing and Non-Farm Payroll reports, economic concerns towards the US continued on Tuesday afternoon after the publication of ISM’s Non-Manufacturing Composite PMI. Letting down hopes of a strong US economy, July’s solid score of 55.5 fell to a six-year-low of 51.4.
Sterling also advanced as many investors with short-positions on the currency adjusted their positions and bought the currency up in more long-term investments instead due to a perceived shift in consensus on how the British economy will perform in the next few months. There had previously been a record number of bets against GBP/USD.
Euro (EUR) – The Pound to Euro exchange rate fluctuated with an upward bias on Tuesday, but ultimately struggled to sustain any of its advances despite US Dollar weakness boosting EUR exchange rates.
Following a disappointing US Non-Manufacturing PMI, investors sold off the US Dollar in droves, buying up rivals such as the more appealing Pound. While Sterling briefly surged to a six-week-high against the Euro, the Euro was able to even things out by the end of the day as USD sellers also bought into the shared currency.
As a result, GBP/EUR fluctuated relatively flatly as the day drew to an end, unable to hold near its best levels of over 1.20.
The Euro may also have been bolstered slightly by Tuesday’s data, which revealed improvements in retail PMIs for August throughout the Eurozone as well as Q2 growth scores coming in as expected.
The Euro struggled to advance on Wednesday however, as disappointing German industrial production figures and anticipation for Thursday’s European Central Bank (ECB) meeting weighed the shared currency down. The ECB is not expected to expand easing measures this week, but could spark speculation depending on its tone.
Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate gained around a third of a cent during Tuesday’s session as Monday’s oil-correlated rally faded.
The Canadian Dollar has tight connections to the performance of oil, due to Canada’s status as an oil-producing nation. As a result, Monday’s news that Saudi Arabia and Russia had agreed to work towards stabilising oil prices sent oil prices and the ‘Loonie’ soaring.
However, on Tuesday markets began to rethink the likelihood that oil-producing nations would successfully negotiate a way to increase oil prices any time soon. The most regularly speculated solution is to put a cap on oil production output to stimulate demand and prices, but it is commonly thought that an agreement would be difficult among so many nations.
GBP/CAD trended a little more flatly on Wednesday morning as Canadian investors awaited the Bank of Canada’s (BOC) September policy decision. The bank is not expected to make any policy changes, but optimism towards the economy may boost the ‘Loonie’ as investors compare the tone of the Canadian bank with its US counterpart below the border.
Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.
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