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Archive | Currency News

Euro Gains In Early Session After Sharp Friday Decline

The Euro gained a bit of ground on the US dollar in early trading, after a hefty fall on Friday when encouraging US data was released, with better than expected figures on retail sales and consumer sentiment in the US.

The Euro stood at 1.1317 dollars at 9AM, versus 1.1309 dollars on Friday close.

The Euro also gained some ground against the Japanese Yen to 123.22 yen versus 122.85 on Friday.

The US Dollar hit a 2 week high on Friday after the economic data hit the markets. This resulted in a strong decline in the majors of EURUSD and GBPUSD.

These statistics have again fueled speculation about a new rate hike by the US Federal Reserve (Fed), although the outlook remains uncertain on whether that will actually happen in June. Markets remain cautious and not take into account the low probability of a rise in June.

In December, the Fed raised its interest rate for the first time in nearly 10 years, which in turn made the dollar more profitable and therefore more attractive to investors, but since then, the US economy has shown signs of unease.

On Friday Goldman Sachs published similar reports as Deutsche Bank in revising their 12-month euro/dollar forecasts. The respected broker has now forecast the euro would be trading at $1.05 in a years time, up from a prior forecast of 95 cents.

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Euro Holding Firm But Yen Weakens On Further Intervention Talk

In early trading on Tuesday euro held firm against the US dollar amid renewed discussions on Greece, the US dollar however rallied against a weaker yen as the sound bites from Tokyo suggesting that the Bank of Japan is prepared to intervene in the currency market.

The dollar gained ground yesterday against the yen rising to 108.75.

The Euro US dollar is holding firm around the 1.138 level, as new talks are set in motion on the future of Greece that could put pressure on the single currency.

On Monday night there was an announcement that an agreement between Athens and creditors could be finalised during the coming days. However traders were not so sure.

As far as the US dollar and Japanese yen goes, statements from the Japanese authorities have made it look almost certain that they are ready to intervene in the markets to stop the slide in the yen. This rhetoric has caught the attention of the markets and traders are ready to take advantage of the situation as it begins to unfold.

In the United Kingdom this week all eyes will be focused on the official bank rate and the monetary policy summary released on Thursday midday. Although the general consensus is that the Bank of England will not increase rates, the attitude towards the economy in the notes will be closely scrutinised by traders.

The United States Federal reserve have held interest rates on hold since the hike at the back end of 2015, and although many thought the United Kingdom would follow suit as yet the Bank of England has refrained from doing so. This has been partly due to a renewed weakness in the economy and unstable markets. No doubt the Bank of England would like to see the effect of the Brexit vote before it changes any monetary policies.

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GBP Surges To Highs and Possible Yen Intervention

Another bullish week for GBPUSD ended with a strong second half pushing the rate up to the high of early February 2016. Ending the week at 1.4610, this was sharply higher from the low of 1.4400 on Monday, and bodes well for the British Pound in the coming weeks.

Whilst there was some disappointing data, including consumer confidence coming in lower at -3, the slide in the US Dollar along with strength in Japanese Yen meant that Sterling was able to gain ground and push on towards the 2016 high.

The strength in Yen is putting pressure on the Japanese economy, with Japans finance minister stating they may have to take action as the situation is worrying. Japanese Finance Minister Taro Aso stated:

“The yen strengthened by five yen in two days. Obviously one-sided and biased, so-called speculative moves are seen behind it, It is extremely worrying. Tokyo will continue watching the market trends carefully and take actions when necessary,”

The strength in Yen is hitting Japan’s exporters hard, Toyota and Sony, two of Japan’s heavy weight exporters, are feeling the pinch. Goods will become more expensive overseas, and limits the profits of these giants.

The hints are string from Aso that they could intervene in the currency market to stop the steep rise.

Stateside, the Federal Reserve opted to leave interest rates unchanged, but left the door open to a possible rate hike in June. Whilst a muted response in the markets initially, the US Dollar began to slide toward the end of the week, and Gold flew higher on the news.

The coming week is another big one in the United States, with ISM Manufacturing Data out on Monday, and Non-Farm Payroll Data due on Friday. During the week leading up to Non-Farm data, the markets can be subdued, but often spring into action as the weekend approaches.

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Euro Exchange Rate Weaker, As Data in The US Adds Pressure

On the foreign exchange market today, the Euro exchange rate retraced much of yesterday’s gains (+ 0.56%) after disappointing US statistics released. In a timely manner, right on the eve of the meeting of the ECB, the euro fell 0.31% to 1.0594 dollars, the low level of Friday night. The currency has also fallen against most of the majors.

Waiting around for the ECB (whose decision is expected tomorrow) or not, the euro rebounded against the dollar after the release of the ISM survey in the manufacturing sector.

The United States manufacturing PMI in November, which is the lowest since 2009 and below the threshold of 50 (48.6 in November), brings this leading indicator into contraction territory.

Because of this, the expected report on Friday for US employment will be closely monitored. As a preliminary, traders will therefore pay attention, to the results of the ADP survey on employment in the US private sector, which tends to foreshadow the official figures from the Labor Department. The consensus expects 190,000 jobs created approximately for ADP, and about 200,000 for “NFP” due Friday.

Still in the US, investors also will learn about the productivity figures for the third quarter, weekly oil stocks and into the evening, the Beige Book from the Fed is expected.

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Pound Holding Steady Despite Concerns Over Steel Industry

As traders await British government spending data, the Pound is holding steady versus most of its major peers. A slight lean towards depreciation can be attributed to ongoing concern regarding the UK steel industry. With an influx of cheap steal from China pricing British manufacturers out of the market, as many as 1 in 6 jobs could be lost over the coming month.

During the European session the interbank Pound Sterling to Euro (GBP/EUR) exchange rate was in the region of 1.3574.

Euro (EUR)

With many traders now convinced that the European Central Bank (ECB) will hold off expanding monetary policy on Thursday after a bank lending survey showed Euro-area banks eased loan conditions, the shared currency edged higher versus many of its currency rivals. With a distinct lack of domestic data to provoke volatility, the common currency is likely to hold its current position versus its major peers.
During the European session the interbank Euro to Pound Sterling (EUR/GBP) exchange rate was in the region of 0.7364.

US Dollar (USD)

Ahead of this afternoon’s US Mortgage Applications data, the US asset was trending in a fairly narrow range. Ongoing uncertainty regarding the timing of a Federal Reserve benchmark rate hike is weighing on demand after Fed officials made divergent speeches. Concern over China’s apparent economic slowdown also continues to weigh on the US asset with policymakers highlighting global growth issues as a major stumbling block preventing tighter policy.
During the European session the interbank US Dollar to Pound Sterling (USD/GBP) was in the region of 0.6482.

Australian Dollar (AUD)

China’s equity market saw losses at the close of Wednesday’s Asian session which has caused dampened market sentiment. The Shanghai Composite Index ended the session nearly 3.1% down, the biggest drop in a month. As a risk-correlated currency, the ‘Aussie’ (AUD) declined in response to trader risk-aversion strategies. A 0.1% increase in September’s Westpac Leading Index wasn’t enough to provoke ‘Aussie’ gains.
During the European session the interbank Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was in the region of 0.4677.

New Zealand Dollar (NZD)

Much like its antipodean counterpart, the New Zealand Dollar declined in response to China’s falling stock prices. Now that dairy prices have settled, the ‘Kiwi’ (NZD) has seen significant losses after having appreciated considerably over the past month. A slower pace of Credit Card Spending growth in September also weighed on demand for the Oceanic currency. Also weighing heavily on demand for the New Zealand Dollar was the fact that dairy prices declined. The latest Global Dairy Trade index slid -3.1% which ended a 4-month streak of rising prices.
During the European session the interbank New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate was in the region of 0.4348.

Canadian Dollar (CAD)

After China’s stocks fell by over 3% crude prices declined amid speculation of cooling demand from the world’s second-largest economy. This weighed on demand for the Canadian Dollar. Later this afternoon the Bank of Canada (BOC) interest rate decision is likely to provoke significant volatility. Although the central bank is not expected to move on policy, there is the potential that the accompanying report will signal future easing given the long period of low crude oil prices.
During the European session the interbank Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate was in the region of 0.4970.

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UK Unemployment Falls and Pound Responds

The surprising slide in the UK’s unemployment rate gave the Pound a notable boost on Wednesday and the British currency was able to carry these gains through to Thursday. Both the GBP/EUR and GBP/USD exchange rates were trending in a stronger position, with investors speculating that the erosion of slack in the UK’s labour market could outweigh inflation concerns and prompt the Bank of England (BoE) to adjust policy sooner rather than later. With UK data lacking today Pound movement may be limited.

US Dollar

Bets that the Federal Reserve will need to wait until 2016 before adjusting borrowing costs were further supported on Thursday as the annual rate of US inflation printed at an underwhelming 0.0%. Although the core measure of consumer price gains did rise to 1.9% the result wasn’t cheery enough to give the US Dollar much of a boost. For the ‘Greenback’ to rally today, the US University of Michigan Confidence Index will need to print strongly. Economists have forecast that the measure will rise from 87.2 to 89.0.

Euro

Comments from European Central Bank (ECB) policymaker Ewald Nowotny put the Euro under pressure on Thursday and saw the common currency slide against both the Pound and US Dollar. Nowotny asserted that it was ‘obvious’ the ECB needs to be doing more to stimulate growth in the currency bloc. This was taken as a sign that the central bank is preparing to expand quantitative easing, a development which would likely undermine demand for the common currency. Today’s trade balance and final inflation figures for the Eurozone are likely to have an impact on the Euro’s performance.

Australian Dollar

The prospect of US borrowing costs remaining lower for longer helped the Australian Dollar shake off the impact of a slightly disappointing domestic employment report and retain previous gains against several of its rivals. However, concern that the Reserve Bank of Australia (RBA) could have further rate cuts in mind have caused the ‘Aussie’ to soften against the Pound before the weekend.

New Zealand Dollar

Like the Australian Dollar, the New Zealand Dollar came under selling pressure overnight, with investors profit taking following the ‘Kiwi’s recent surge. New Zealand’s third quarter inflation data printed more strongly than forecast, with consumer prices being up 0.4% on the year in the third quarter rather than the 0.3% forecast, but the report had little positive impact on the New Zealand Dollar.

Canadian Dollar

The Canadian Dollar managed to post a modest gain against the Pound on Thursday in spite of Canadian Existing Home Sales data showing a -2.1% decline and oil prices easing. Today’s Canadian Manufacturing Shipments report could weigh on the ‘Loonie’ however if it shows the -1.0% month-on-month decline forecast by economists.

South African Rand

Before the weekend the Rand was preparing to fight its way back under the 13 Rand per Dollar level as Fed interest rate hike expectations kept demand for the ‘Greenback’ limited. South African data has been lacking this week but next week Rand volatility is likely to occur in response to the nation’s inflation and retail sales reports.

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