Australian Dollar surges Sept 2

02 September 2016 by News Desk   |   SHARE  

Low risk sentiment and better-than-expected UK Manufacturing PMIs allowed the Pound to Australian Dollar to surge.

Australian Dollar rate was able to hold its ground better, keeping the pair over half a cent away from its best levels, according to currency specialists TorFX

Falling sentiment for the US Dollar, as well as hopes that iron ore prices would not fall much further helped the Australian Dollar remain steady.

While risk-sentiment has remained low since Fed rate hike bets surged last week, the ‘Aussie’ and its risk-correlated peers could advance on Friday afternoon if US NFP results disappoint.

New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate was able to briefly strike a three-week-high on Thursday as investors reacted to Britain’s August Manufacturing stats.

However, as Reserve Bank of New Zealand (RBNZ) rate cut bets remain low and New Zealand ecostats score sturdily, the ‘Kiwi’ Dollar has continued to be one of the most appealing risk-correlated currencies due to its high yield.

This helped keep GBP/NZD away from its best levels on Thursday, and the ‘Kiwi’ could be among the first currencies to surge if Friday’s US Non-Farm Payroll report disappoints investors.

Australian Dollar hits best levels

Pound Sterling (GBP) – Sterling surged considerably across the board on Thursday, as markets were shocked by August’s surprising growth in Manufacturing PMI.

Following July’s Brexit-vote influenced downtick in manufacturing, analysts expected another month of contractions. However, the final score of 53.3 came in well above the predicted contraction of 49 and cheered markets, continuing the trend of August data showing a rebound from July’s Brexit-influenced slump.

This news also caused Bank of England (BoE) rate cut bets to drop. Following the BoE’s aggressive series of easing measures in the first week of August, markets had been anticipating further easing in the coming months. Solid ecostats have caused analysts to speculate that more stimulus may not be necessary.

However, as markets considered that Sterling’s Thursday rally may have been overdone, the currency was unable to hold its best levels for the rest of Thursday and Friday’s smaller-than-expected construction contraction was unable to see Sterling extend its best levels.

US Dollar (USD) – The Pound to US Dollar exchange rate was able to advance by around two cents on Thursday, recovering from its weekly losses and reaching its highest levels since the first week of August.

While the US Dollar has remained sturdy for most of the past week due to higher Fed rate hike bets following the Jackson Hole symposium last week, it lost a lot of ground on Thursday following a disappointing set of PMI results.

Markit’s final US Manufacturing PMI for August printed below expectations at 52, while ISM’s headline Manufacturing PMI for the month came in with a surprising contraction of 49.4 despite growth of 52 being expected. This, alongside ISM’s disappointing prices paid and new orders figures, caused investors to lose faith in a Fed rate hike bet on Thursday as they sold the US Dollar in favour of rivals like the Euro.

Friday’s session is key for the US Dollar. As Fed officials continue to put importance on the US job market, the strength of August’s Non-Farm Payroll report will be the focus of global markets as the week draws to an end.

Euro (EUR) – The Pound to Euro exchange rate gained almost a cent on Thursday thanks to a bullish Pound and a Euro weakened by underwhelming Eurozone news.

Following Wednesday’s highly disappointing Eurozone inflation stats, Thursday’s final August Eurozone Manufacturing PMI scores also underwhelmed investors by failing to meet preliminary scores. Manufacturing came in at 51.7, causing concern that the Eurozone economy was not performing as strongly as hoped.

However, GBP/EUR was unable to hold its best levels of over 1.19 on Thursday afternoon as the US Dollar weakened on poor US PMIs, causing investors to buy up the Euro instead despite the underwhelming PMI result.

Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate was able to advance by around a cent and a half on Thursday thanks to Britain’s optimistic August figures, as well as continued declines in the price of oil, Canada’s most lucrative commodity.

Despite news on Thursday suggesting that Saudi Arabia was becoming increasingly eager to solve the oil price issue, a large oversupply of crude oil in the US as well as generally low hopes that producers will agree on a production freeze left the commodity cheaper – and the ‘Loonie’ weaker.

Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.

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