Headlines
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GBP/EUR Back to 1.36 Despite Confidence Gain
– UK GDP on Tap
•
‘Cable’ Drops
– US Dollar Broadly Stronger on Revised Growth
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Australian Dollar Climbs
– Supported by Global Equity Gains
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Chinese Intervention Steadies Commodities
– Rising Oil Price Supports ‘Loonie’
Sterling
With investors focused on global stock markets and the UK’s only economic release (Nationwide House Price figures) having little impact, the Pound spent Thursday’s European session fluctuating around the 1.36⁄1.37 level against the Euro.
Sterling gave up more of Monday’s gains against the commodity currencies as Chinese intervention bolstered their appeal and ‘Cable’ slumped to 1.54 following the publication of positively revised US growth data for the second quarter.
As the recent market upheaval has left some industry experts betting that the Bank of England (BoE) will refrain from adjusting interest rates until the third quarter of 2016, the Pound failed to derive much benefit from today’s GfK Consumer Confidence report – despite the sentiment measure climbing from 4 to 7 in August.
However, if the UK’s Q2 GDP figure also comes in above expected levels Sterling could advance before the weekend. That being said, the Jackson Hole Symposium in Wyoming will be drawing attention. If central bankers like the BoE’s Mark Carney use the event to highlight the impact ‘Black Monday’ is likely to have on interest rate outlooks, currency volatility could ensue.
Euro
Unlike most of its major currency counterparts, the Euro emerged stronger from the ‘Black Monday’ chaos, with the unwinding of carry trades driving the common currency higher across the board.
However, after pushing the Pound to an over three-and-a-half month low, the Euro ceded its advance as the week progressed.
Demand for the Euro eased as China intervened to stabilise the stock market and European Central Bank (ECB) officials hinted at the prospect of additional easing being deployed to bolster the Eurozone’s inflation projections.
The common currency began today’s European session trading in a stronger position against both the Pound and US Dollar but if Germany’s Consumer Price Index shows that the annual rate of inflation eased from 0.2% to 0.1% (as economists expect to be the case) the Euro could falter before the close of trade.
US Dollar
‘Black Monday’ appeared to be the final nail in the coffin for hopes of a September interest rate adjustment from the Federal Reserve and the US Dollar spent the first half of the week fluctuating as a result.
However, the Fed has frequently asserted that any policy alterations will be data dependent and two major releases impressed this week.
The nation’s Durable Goods Orders figure exceeded expectations on Wednesday, revealing strong gains in both June and July, and yesterday’s second quarter growth data was massively revised from 2.3% to 3.7%. The US Dollar rallied after the GDP report was published, with ‘Cable’ being driven to a low of 1.5378 – down from the high of 1.5802 struck earlier in the week.
If US data continues beating projections the Fed could still be moved to hike interest rates before the end of the year. US reports to be aware of today include Personal Consumption Expenditure and the Final University of Michigan Confidence reading.
After dropping to an eight-year low against the Pound at the start of the week the Canadian Dollar fought back valiantly, defying Bank of Canada (BOC) rate cut speculation to return to levels seen before the ‘Black Monday’ stock market crash.
The ‘Loonie’ also recovered on Thursday as commodities like oil rose after encouraging US growth data whetted risk appetite and China lent support to its equity market.
Canadian ecostats were lacking this week, leaving global economic developments and commodity price shifts to dictate CAD movement, but next week investors will be paying keen attention to Canadian growth, trade balance, manufacturing and employment figures. Any data which supports the case in favour of a BOC rate cut may see the Canadian Dollar reverse its recent gains.
Australian Dollar
With China’s intervention bolstering the price of key commodities, the Australian Dollar’s rebound was able to continue as the week drew to a close.
After achieving a multi-year best rate of 2.2234 at the outset of the week; the ‘Aussie’s dogged recovery has seen the GBP/AUD pairing shift back to the 2.14 level.
Although Reserve Bank of Australia (RBA) Governor Glenn Stevens recently intimated that the central bank has done all it can to improve Australia’s economic outlook, some industry experts haven’t ruled out further policy loosening. While interest rates are expected to remain on hold at next week’s RBA gathering, any hints that developments in China could lead to another rate cut taking place later down the line would weigh on the ‘Aussie’.
The New Zealand Dollar followed other commodity currencies higher towards the close of the week as reports indicated that Chinese authorities were attempting to bolster the local stock market ahead of next week’s World War II victory parade.
New Zealand’s economic calendar is looking fairly sparse next week, with only the ANZ Business Confidence Index and Export/Import Price figures scheduled for publication.
Data Released Today
09:30 GBP Gross Domestic Product (YoY) (2Q P) 2.6%
09:30 GBP Gross Domestic Product (QoQ) (2Q P) 0.7%
13:00 EUR German Consumer Price Index – EU Harmonised (YoY) (AUG P) 0.1%
13:00 EUR German Consumer Price Index (YoY) (AUG P) 0.2%
13:30 USD Personal Consumption Expenditure Core (YoY) (JUL) 1.3%