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 • UK inflation slides to 2.8% as expected - Sterling relatively unscathed.
• Eurozone Industrial Production rises - German ZEW survey excels.
• US Retail Sales relatively strong - GBP/USD flat as other Dollar crosses fall.
• Risk sentiment down on Fed concerns - AUD & NZD down vs. Sterling.
Sterling The Pound avoided defeat yesterday as UK CPI inflation was reported to have dropped off slightly in July. The latest Consumer Price Index print showed that price pressures decelerated from 2.9% to 2.8% last month, in line with the Bank of England's prediction that inflation is set to recede throughout the remainder of the year. Declining airfares, clothing and footwear prices influenced the slender fall, however, the recent rise in petrol prices could prevent CPI from tumbling any lower in August.
The Office for National Statistics announced that Average Earnings remained well below the rate of inflation, improving by only 1.0% in the three months to May, suggesting that falling real wages could yet come back to haunt the UK economy. With inflation data out of the way the limelight will fall on this morning's Unemployment report, which is expected to show that joblessness remained at 7.8% in the three months to June. With BoE monetary easing now linked to the UK jobs market any deviation between forecasts and the actual result will lead to accentuated volatility for Sterling crosses.
Euro In the Eurozone yesterday it was reported that Industrial Production rose by 0.7% during the month of June as Ireland, Germany and Greece performed particularly positively. The German Economic Sentiment ZEW survey also came in optimistically at 42.0 as businesses in the currency bloc's most industrious nation felt more confident about future prospects. The strong pair of economic indicators bode well for this morning's GDP print, which is forecast to show growth of 0.2% in the 17-nation bloc. However, the Euro failed to make any inroads against the revitalised Pound yesterday as GBP/EUR appreciated by around half a cent to a 6-week high.
With little direct stimulus it is believed that yesterday afternoon's Sterling rallies were brought about by a 'fat finger' trade, as somebody entered an unintentionally large figure into a computer trading system, which triggered a bout of stop-loss orders and led to further gains for GBP. It is interesting to note that against the US Dollar the Pound quickly retreated following the unusual trade but against the Euro Sterling managed to hold onto its 'fat finger' gains, possibly indicating that traders see scope for further upward momentum in the Pound to Euro exchange rate.
US Dollar The Pound remained fairly well supported against the US Dollar yesterday, barely moving at all as British inflation data fell and US Retail Sales data improved. The 'Greenback' advanced against most of the majors yesterday as US Advance Retail Sales printed at 0.2% for July, marking the fourth consecutive month of expansion. Although the headline print was -0.1% lower than markets had anticipated June's score was revised higher by 0.2% and the figure for July excluding automobile sales came in at a 7-month high of 0.5%. The encouraging data release boosted hopes that the Federal Reserve could slowdown its asset purchasing programme in September.
Yesterday's trading session substantiates the argument that traders are cautiously optimistic regarding the Pound's prospects going forward.
Canadian Dollar The Canadian Dollar lost out on around half a cent to the Pound yesterday as taper speculation damaged global risk sentiment. With asset purchases set to be slowed down at some point in the near future, perhaps as early as September, investors are continuing to move out of riskier assets such as the Canadian Dollar, which is hugely sensitive to the commodities market due to Canada's large production levels of crude oil.
Australian Dollar Helped by the 'fat finger' trade and growing risk aversion Sterling managed to strengthen by around 0.3 cents against the Australian Dollar yesterday. The 'Aussie' was also negatively impacted by a National Australia Bank report showing that Business Conditions are currently at a 4-year low in the Antipodean country.
New Zealand Dollar The highly volatile New Zealand Dollar tumbled by around -0.7 cents against the Pound yesterday as global market sentiment benefitted the pseudo-safe haven UK currency rather than the high-risk, high-profit 'Kiwi'. 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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