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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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