Dear Subscriber, Please find below today's update which gives you an insight into the current market conditions, enabling you to keep informed and up to date on the latest currency movements. Headlines • Carney unable to quash rate hike speculation - looser banking regulations support Pound.
• GBP/EUR up 0.3 cents - rising crude oil could hurt German GDP.
• GBP/USD largely flat - USD absorbs defensive inflows due to Syria concerns.
• New Zealand dairy exporter finds no danger in product - GBP/NZD down a cent.
Sterling The Pound gained ground against most of its fellow competitors in the wacky race of currencies yesterday as Bank of England Governor Mark Carney failed to convince markets that interest rates will remain at the current record low 0.50% until 2016. Carney commented that Britain is currently experiencing the green shoots of a broad based economy but warned that a lot more needs to be done in terms of productivity before the UK will be in a fit state for a tightening of credit conditions. The Governor insisted that the 7.0% Unemployment objective is a threshold, not a target, and argued that rates would not automatically be hiked if that level was reached; just that the Central Bank will not even consider raising the interest rate until then. Falling short of wiping out the "knockouts" - which would be damaging to the BoE's credibility - there was not a lot that Carney could do to persuade investors to hold back on rate hike speculation and this worked in the Pound's favour. Additionally Sterling strengthened in reaction to the news that the BoE intends to reduce the amount of liquidity buffers required of commercial banks, which raised the prospect that some UK gilts will be sold back into the market by banks as they adjust their portfolios, thus pushing up the yield and making Sterling more desirable to speculative investors. Euro The Euro declined by around -0.3 cents against the Pound yesterday as markets breathed a sigh of relief following Mark Carney's policy statement, which did little to perturb markets from pricing in a rate hike before 2016. The single currency was also damaged by a lacklustre German GfK Consumer Confidence reading of 6.9, below analysts' forecasts of 7.1. Inflation was cited as the primary concern among German consumers but, considering the score is just one percentage point below last month's 6-year high, the mildly upsetting print did not have a massive effect on the Pound to Euro exchange rate. It is possible that the Euro was also impacted by the burgeoning crisis in Syria, which has thrown the Middle Eastern supply of crude oil into jeopardy and could potentially wreak havoc in the German Industrial Production Industry, which relies heavily on imported crude oil. Higher prices would mean less profit for German companies and this could seriously derail the Eurozone's recent revival efforts. US Dollar The Pound ended for the day around 10 pips worse off against the US Dollar yesterday as the world's first and foremost reserve currency continued to absorb defensive inflows in relation to the military conflict in Syria. The 'Greenback' was also boosted by a strong 8.6% rise in domestic Pending Home Sales, suggesting that the recent rise in market interest rates, due to Fed taper speculation, is not impacting all areas of the US housing market. Sterling's losses could have been far worse, indeed GBP/USD sunk to a 3-week low during the afternoon in anticipation of a more convincing argument from BoE Governor Mark Carney, but with the Central Banker largely just repeating comments from earlier on in the month the Pound managed to claw back the overriding majority of its losses later on in the day.
Canadian Dollar The Pound to Canadian Dollar exchange rate dipped by around a cent in the middle of the day but recovered completely by the time that the bell rung to close the European session as traders chose not to take much notice of BoE Governor Mark Carney's latest batch of dovish rhetoric. Later today US GDP data is expected to show a quarterly expansion of 0.7%, but any score lower than that could boost global risk appetite by reducing slightly the chances of a 'Septaper' from the Federal Reserve. The 'Loonie' would be expected to strengthen under these circumstances.
Australian Dollar With uncertainty surrounding the situation in Syria gripping financial markets at the moment, and Sterling emerging strongly from its latest event risk - the Carney speech - it seems likely that GBP/AUD could once again challenge 3-year highs in the region of 1.7483 in the foreseeable future. The imminent Fed taper could be the next catalyst for Sterling strength against the 'Aussie'.
New Zealand Dollar The commodity-sensitive New Zealand Dollar grew by around a cent against the Pound yesterday as health officials reported that there was no sign of botulism-causing bacteria in the country's largest dairy exporter's whey protein concentrate. The good news, allowed the 'Kiwi' to strengthen, as fears of contamination were proved unwarranted. If you need any further assistance, or require a live dealing quote - please do not hesitate to contact me on 01736 335250 or send an email to info@torfx.com Regards,
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