Sterling falls against Australian Dollar
26 July 2016 by News DeskThe Australian Dollar benefited against the US Dollar amid expectation the FOMC will not raise US interest rates on Wednesday.
Australian Dollar – Anticipation for the upcoming Bank of Japan meeting has also sparked moves away from the US Dollar. The BoJ is still seen as likely to add a lot of stimulus however, and the possibility of this is sending investors away from the ‘safe-haven’ Yen towards riskier assets like the Australian Dollar, according to currency specialists TorFX
Investors will look out for Australia’s Q2 Consumer Price Index report, due for publication on Wednesday morning. This report is set to be the single greatest indication of whether or not the Reserve Bank of Australia is likely to cut rates in August.
New Zealand Dollar (NZD) – The New Zealand Dollar surged higher across the board on Tuesday morning, less weighed down by the imminence of an inflation report than its antipodean peer, the Australian Dollar.
The ‘Kiwi’ was able to recover from many of its recent lows, though markets are still pricing in a Reserve Bank of New Zealand (RBNZ) interest rate cut in August. Despite this, the risky currency was able to easily capitalise on expectations that the FOMC is unlikely to hike rates and the BoJ is likely to add stimulus into the Japanese economy.
Pound falls against Australian Dollar
Pound Sterling (GBP) – The Pound saw mixed movement initially on Monday but began to drop after yet another report was released that revealed the effect of the Brexit on Britain’s economy.
A Manufacturing report from CBI repeated the trend set by last week’s flash PMI results, indicating that business optimism in the Manufacturing sector had plummeted in July.
Sterling dropped throughout Monday and continued to drop on Tuesday morning as investors reacted to news that a previously relatively hawkish Bank of England policymaker had changed his stance following the news.
BoE official Martin Weale recently stated that he would wait for more economic data before considering a key interest rate cut necessary. However, in an interview with the Financial Times, Weale admitted that Friday’s PMI data was ‘a lot worse’ than he thought it would be.
This sent the Pound falling, with investors increasing bets of an August BoE rate cut even further.
US Dollar (USD) – The Pound was able to hold its ground slightly during Monday’s session, slipping slightly as UK manufacturing news concerned investors. The pair continued to slip on Tuesday, but as the Federal Open Market Committee (FOMC) meeting approached, investors were hesitant to move too suddenly on the ‘Greenback’.
It is also possible that the US Dollar will move in response to Tuesday’s key July consumer confidence figures. This report will give markets a strong indication of how US citizens have changed since the UK’s EU Referendum, which has been considered a downside risk to the US economy.
Currently, the figure is predicted to drop from 98 to 95.5. Overall though, eyes are set on Wednesday’s FOMC meeting. The Fed is not expected to make any interest rate changes, but a hawkish tone in response to recent data could send 2016 rate hike bets soaring.
Euro (EUR) – The Pound to Euro exchange rate lost around half a cent during Monday’s session and continued to drop on Tuesday, as confidence surrounding the after-effects of the Brexit vote continued to wane. GBP/EUR dropped below the key level of 1.19 on Tuesday after BoE policymaker Weale adopted a more dovish stance than last week.
The Euro continued to be relatively sturdy against its rivals on Tuesday, as hopes that the Eurozone had remained resilient against Brexit shockwaves remained high.
Following Friday’s better-than-expected Eurozone PMIs, an analysis from German company IFO repeated a similar trend of dropping less than forecast. While the headline business climate index dropped from 108.7 to 108.3, Brexit effects were expected to be worse and knock business climate down to 107.5.
More analysts are now agreeing with the sentiment that warnings of Brexit damage to the Eurozone economy – while still a downside risk – were overblown.
Canadian Dollar (CAD) – The Canadian Dollar continued to see mixed movement on Tuesday morning, but was able to advance slightly against a weakened Pound.
Prices of Canada’s most lucrative commodity, oil, decreased by around -2% during Monday’s session. This three-month-low price weighed heavily on the ‘Loonie’ Dollar. The Pound was able to gain around a cent against the Canadian Dollar because of this, and as a result Tuesday’s muted losses still leave GBP/CAD well above the week’s opening levels.
On the other hand, oil production in Alberta, Canada (which had recently been struck by a horrific wildfire) was beginning to resume. While this is leading to a drop in oil prices, it will be good news for Canada’s economy.
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