Pound Sterling
For most of this week the Pound continued its trajectory downwards after the UK was stripped of its AAA credit rating by Moody’s. The currency plummeted to its weakest level in 31-months against the US Dollar and hit a 16-month low against the Euro. On Monday afternoon the markets recovered some of their nerve and pushed the Pound to above the 1.16 mark against the Euro and saw it stabilise against the US Dollar. The outcome of the Italian elections saw risk aversion hit the markets after it ended in a stalemate.
Midweek the Pound once again weakened against the Euro as investors awaited the release of the latest UK GDP data. Economists were expecting the data to show that the UK’s economy contracted in the last quarter of 2012. The figure came in as expected but also showed that year on year the economy was 0.3% stronger than in 2012.
Things started to change on Thursday as Sterling strengthened slightly against the Euro and US Dollar after a report showed that UK consumer confidence held steady in February. Optimism about personal finances rose to their highest level in almost two years. The sentiment index stayed at -26 after last month’s rise of 3 points. The Pound strengthened against the Euro after the Netherlands revealed that its budget deficit will breach the European Union’s limit this year and in 2014. Continuing worries over Spain’s economy also weighed the single currency down against Sterling.
The British currency strengthened upwards to around the 1.16 mark. On Friday the Pound once again took a battering as British manufacturing posted a shock contraction, the PMI fell to 47.9 confounding economist predictions of a rise to 51.0. The Pound looks set to continue its weakening trend into next week.
US Dollar
Against the Pound the Dollar soared after Moody’s slashed the UK’s credit rating. Against the Euro the Dollar also made gains after the Italian elections ended in a stalemate. The US currency jumped to a seven-week high as investors sought shelter in the safe-haven currency.
The ‘Greenback’ extended its gains against the Japanese Yen and pared its losses against the Euro due to the release of a slew of economic data on Tuesday. Consumer confidence exceeded economist expectations by rising to 69.6, and new home sales soared to their highest level since July 2008. The currency was also supported by comments made by Federal Reserve Chairman Ben Bernanke who defended the US Central Bank’s stimulus measures.
On Friday the ‘Greenback’ weakened slightly after the world’s largest economy posted GDP figures that failed to impress investors. The world’s largest economy posted growth of just 0.1%; economists had been predicting a rise of 0.5%.
Euro
The Euro soared to a 16-month high against the Pound after the UK’s credit rating was cut by Moody’s. Against the US Dollar the currency traded steadily, that was until the outcome of the Italian elections was known. The currency received a slight boost after Cyprus elected the pro Euro Nicos Anastasiades to become the island’s president.
After the deadlock in Italy the Euro fell to a seven-week low against the US Dollar and slumped against the Japanese Yen. The currency fell by 2.6% on Monday, its biggest daily loss since May 6th 2010, when investors were shocked by violent street protests in Greece sparked by austerity measures.
Midweek the Euro strengthened for the first time in three days since falling against the Dollar. It received some respite after the market didn’t suffer further capitulation in Italian bonds. The bond sale tempered concerns over the nation’s election result stalemate.
On Friday the Euro steadied against the US Dollar but remains volatile due to uncertainty from the outcome of the Italian elections and the announcement from the Netherlands that it will miss its target for lowering its budget deficit. In February the single currency slid by 4% against the US Dollar, its biggest monthly slide in nine months.
Australian Dollar
It’s been a week of ups and down for the Australian currency. On Monday the ‘Aussie’ weakened against the majority of its peers after a preliminary survey showed that China’s manufacturing is expanding at a slower pace than expected, dimming the outlook for Australian trade.
The currency then strengthened against the majority of its peers due to metal prices supporting demand for the resource rich nation’s currency.
On Friday it then weakened against the US Dollar and a number of its peers after Australia’s biggest trade partner, China, posted its latest PMI data. Manufacturing activity in the Asian economy slowed by a larger margin than expected, dampening interest in the ‘Aussie’. China’s official PMI for February was 50.1, compared with 50.4 in January, and undershooting economists’ expectations of 50.5.
New Zealand Dollar
The ‘Kiwi’ weakened against the majority of its peers this week as it suffered from a weakening in demand for riskier assets.
Midweek the currency found support against its major peers due to economic data showing that business confidence continues to improve in the county. Business confidence rose to a 19-month high. The currency also saw support from data out of Australia that showed that the fall in capital spending wasn’t as sharp as people feared.
On Friday the currency once more weakened due to weaker-than-expected manufacturing data out of China. Demand for the New Zealand currency is still dampened as investors remain uncertain over the outcome of the Italian elections and the growing concerns that the Euro crisis is set to return in force.
Canadian Dollar
The ‘Loonie’ began the week trading at its lowest level since June 2012 against the US Dollar due to concerns over the state of the Canadian economy. The worse-than-expected industrial data and falling price of crude oil all weighed down the currency.
Today, Statistics Canada is set to release GDP data which is expected to show that the Canadian economy grew by 0.7% in the final quarter of 2012.
South African Rand
The Rand began the week stable against the Dollar before breaking the key R9.0 level on Friday.
The currency fell to a one-month low against the US Dollar and breached the key R9.0 level after the currency was weighed down by data showing that the South African trade deficit widened to a record level. The trade numbers came the day after Finance Minister Pravin Gordhan’s budget which projected a wider-than-expected fiscal deficit. Combined with a wide current account deficit, the Rand will remain under pressure.
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