Pound Sterling (GBP)
The Pound (GBP) was trending higher against other currency majors on Thursday after Bank of England (BoE) policymaker Martin Weale reinforced investor sentiment in Sterling. Weale reiterated that the central bank should increase interest rates in the near future or risk a surge in inflation. Weale suggested that Wednesday’s 0.2% drop in UK unemployment recorded a significant amount of space capacity has been used up—a factor to encourage rate hikes. Weale commented: ‘I think it may be sensible for policymakers to give some attention to the rate at which space capacity is being used up.’
Euro (EUR)
The Euro (EUR) has weakened after the Eurozone’s never-ending list of problems continues. Thursday confirmed economists’ forecasts of only a 0.3% inflation growth on the year in September. Economists fear a triple-dip Eurozone recession following Germany cutting its growth forecasts. Economist Ben Brettell commented: ‘The most severe problems in the Eurozone have so far been limited to the periphery, with the core remaining in relative good health. However, in recent months we have seen a shift. Some peripheral economies are now registering decent growth, while the core looks in trouble.’ Eurostat are scheduled to release their first Gross Domestic Product Estimate since the 2010 ESA adoption on Friday which may see some Euro movement.
US Dollar (USD)
The US Dollar (USD) consolidated losses on Thursday after it was deemed Wednesday’s ‘Greenback’ selloff was overdone. The US economic recovery showed strength as Industrial Production rose by 1.0% in September, and Manufacturing Production also recorded a 0.5% expansion. Furthermore, Initial Jobless Claims totalled only 264K instead of the forecast 290K. Despite threats of a global slowdown descending, the Federal Reserve is still scheduled to increase interest rates in 2015. Strategist Martin Schwerdtfeger commented: ‘The market is unwinding some of the moves that we saw yesterday [Wednesday] as we come to the conclusion that, even if a Fed liftoff comes a bit later, that still means the US Dollar continues to have an advantage relative to most measures.’ Friday will see the release of preliminary University of Michigan Confidence figures as well as Building Permits and Housing Starts figures.
Canadian Dollar (CAD)
The Canadian Dollar (CAD) extended its losses on Thursday following Canadian Manufacturing Shipments numbers declining for the first time in 2014 and recording its biggest loss in the last five years. Manufacturing sales contracted by -3.3% in August on the month after July’s 2.9% gain. Industry expert Jimmy Jean suggested: ‘The report speaks for a potentially more difficult second half of 2014, after the very promising first half. To be sure, part of the weakness is payback for a very strong month of July, but given the current context for global trade and industrial output, the case for a bullish manufacturing outlook for Canada is not necessarily compelling.’
Australian Dollar (AUD)
The Australian Dollar (AUD) recorded losses on Thursday after the rapid 1.3% gain it made versus the US Dollar (USD) on Wednesday was deemed unwarranted. Furthermore, the Australian Consumer Inflation Expectation also dropped in October from 3.5% to 3.4%. Westpac Bank stated: ‘The bump up in the trend of expectations, seen through the first half of 2014, has completely faded… Consumers are increasingly seeing a very benign outlook for inflation.’
New Zealand Dollar (NZD)
The New Zealand Dollar (NZD) failed to strengthen on Thursday as commodity prices dampen the market. The latest GLobalDairyTrade auction saw a surprising 1.4% rise but investors were unimpressed. Analyst Susan Kilsby commented: ‘The improvement in prices at last night’s auction result is a good start but we need to see a continuation of this upward trend in order for farmgate milk prices to improve.’ Furthermore, a rise in the Business Performance of Manufacturing Index also failed to bolster the ‘Kiwi’. The manufacturing sector saw the index climb to 58.1 in September from 57.0.
South African Rand (ZAR)
The South African Rand (ZAR) has experienced a quiet second half of the week with a lack of domestic data. Looking ahead to next week, Wednesday will see South African Inflation Rate figures released which is expected to sink from 6.5% to 6.4%. The South African Rand may be affected by the threat of Ebola which has been spreading through West Africa in recent months. Currency strategist John Cairns commented: ‘Fears over the global economy are creating crazy swings in international markets. It is clear that any further bad news on the global economy, or maybe even Ebola, will send markets running again.’
