Headlines
• MPC Vote Split 8-1 –
Pound down on dovish BoE Minutes
•
FOMC Minutes Highlight Global Headwinds –
US Dollar falls
•
Oil Prices Rise Above $50 –
Canadian Dollar Gains
•
AUD & NZD End Week Higher –
US rate speculation boosts commodity currencies
Sterling
With the minutes from this week’s Bank of England (BoE) policy meeting suggesting that the central bank is in no rush to raise interest rates, the Pound softened during Thursday’s European session. Sterling fell back below 1.36 against the Euro and briefly slumped under 1.53 against the US Dollar.
The minutes revealed the now-standard 8-1 split in the Monetary Policy Committee (MPC) on the timeline for increasing interest rates, with only one member voting for an immediate revision. The minutes also highlighted that interest rates are unlikely to be adjusted until inflation rises and with annual CPI currently sitting at 0.0% that commentary limited both hike expectations and Pound Sterling demand.
Before the weekend the UK’s latest trade and construction output numbers could be responsible for additional GBP shifts, but investors will also be looking ahead to next week’s more influential inflation and employment numbers.
Euro
Earlier this week the Euro weakened as soft German industrial production data reawakened European Central Bank (ECB) easing concerns.
The common currency later recouped losses thanks to both political developments in Greece and US Dollar weakness, largely holding gains on Thursday in spite of German trade data detailing a concerning slide in exports.
While the Euro is likely to remain supported with the US Dollar being pressured lower by policy speculation, if upcoming ecostats for the Eurozone support the case in favour of the ECB expanding quantitative easing before the close of the year we could see a reversal of the currency’s recent uptrend.
US Dollar
The Federal Open Market Committee (FOMC) policy meeting minutes weighed on the US Dollar during the North American session, with the currency declining against a number of its most traded rivals.
The minutes were seen as adding to the doubt surrounding borrowing costs being adjusted in 2015, despite them stating that the majority of policymakers still feel a revision should be made in the near future.
Although global conditions have stabilised in recent weeks, the economic slowdown in China remains a serious concern and domestic data has been far from impressive.
Should next week’s highly influential US inflation and retail sales reports add to the pressure on the Fed to keep borrowing costs at record lows, we could see the US Dollar slide further against rivals like the Pound and Euro.
Canadian Dollar
Ahead of the release of Canada’s latest employment data the Canadian Dollar was riding high off the back of a further increase in oil prices. The value of Canada’s key commodity pushed through the 50 US Dollar mark during Thursday’s session, providing the commodity-driven ‘Loonie’ with a lift.
Canada’s New Housing Price Index also rose by more than expected in August. Today’s domestic jobs data is expected to reveal a decline in the unemployment rate from 7.0% to 6.9%. If forecasts prove accurate, the Canadian Dollar may extend its five-day gains against the Pound and US Dollar.
The Australian Dollar’s bullish run continued before the weekend, with the currency extending its stretch of daily gains to seven. This marked the ‘Aussie’s most significant rally for two years.
As Australian data was mixed, with Investment Lending declining and Home Loans rising by less-than-projected in August, the ‘Aussie’ uptrend was more to do with US Dollar weakness than Australian Dollar strength.
If the odds of the Federal Reserve increasing interest rates in October remain slim, the AUD uptrend may persist next week.
After the minutes from the last Federal Open Market Committee (FOMC) policy meeting were published, depressed US rate hike expectations pushed the ‘Kiwi’ close to a two-month high against the US Dollar. The South Pacific currency was also up on the Pound as domestic card spending was shown to have increased by more-than-expected.
Spending as a whole was up 0.7% on the month in September while retail card spending accelerated 0.9%, beating the 0.4% forecast.
Data Released Today
09:30 GBP Total Trade Balance (AUG) – Medium
09:30 GBP Construction Output (AUG) (MoM) – Medium
13:30 CAD Net Change in Employment (SEP) – High
13:30 CAD Unemployment Rate (SEP) – High
15:00 USD Wholesale Inventories (AUG) – Medium