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 Q2 GDP upgraded to 0.7% - Pound falls on dovish Carney fears.
• German GDP matches UK at 0.7% - ECB rate cut unlikely.
• US New Home Sales tank - GBP/USD up 0.3 cents.
• Canadian Retail Sales inflation misses forecast - GBP/NZD up 2.3 cents.
Sterling Sterling benefitted on Friday morning from a slight upgrade to the second quarter UK growth figure from 0.6% to 0.7%, however, the Pound found itself sliding down the currency ladder just before midday as traders began to speculate that Bank of England Governor Mark Carney will talk down interest rate hike bets during his speech this week. The initial GBP rallies were brought about by news that British GDP matched the almighty German growth figure in the second quarter. In a strange turn of fate it was also reported that the UK output numbers were supported by net trade, whereas the German growth figures were largely driven by domestic consumption. However, Sterling lost its legs later on in the day as markets began to anticipate a new bout of dovishness from the BoE Governor. Carney's initial intention when releasing forward guidance was to guarantee UK businesses and consumers low interests rates for the foreseeable future in order to boost lending, spur job creation and drive growth. The problem is that investors took the data to mean something else; they focussed on the inflation "Knockouts" and started to price in the possibility of a rate hike one year ahead of schedule, which has had an adverse affect on British lending. Euro The Euro rallied by around 0.35 cents against the Pound on Friday as BoE concerns rocked the Pound and Eurozone Consumer Confidence hit a 2-yaer high. Beating forecasts of -16.5 the European Commission's Confidence report struck a 2-year high of -15.6, giving more weight to recent arguments that the currency bloc is recovering from the debt crisis. The single currency was also supported the confirmation that its flagship economy, Germany, expanded by 0.7% in the second quarter and by comments from European Central Bank policymaker Ewald Nowotny that the ECB is not considering any further rate cuts at this moment in time: "It is a weak recovery, but it is a recovery. I would not see many arguments now for a rate cut." US Dollar Despite a disappointing US New Home Sales print of -13.4% the US Dollar managed to appreciate by 0.3 cents against the Pound on Friday. The 9-month low score was probably caused by the recent surge in interest rates, due to the imminent tapering of Fed asset purchases, which has made mortgages less appealing for prospective buyers. GBP/USD jumped 0.4 cents higher during the morning in response to the stronger-than-expected UK GDP numbers, but tanked -0.8 cents later on due to Carney concerns. The Pound rose modestly against the 'Greenback' following the below-forecast American housing market reading. Yesterday US Durable Goods Orders printed below economists' forecasts of -4.0% at -7.3%, but the downbeat data release was unable to send the Pound to US Dollar exchange rate substantially higher.
Canadian Dollar Sterling spiralled lower to a half-cent daily decline against the Canadian Dollar on Friday as markets revaluated their outlook for the UK currency with regards to a potentially dovish from Governor Carney later this week. In Canada it was reported that CPI inflation improved by less-than-expected in July, printing at just 1.3% compare to predictions of 1.4%. The latest in a long line of misses supports the theory that Canadian GDP growth stalled during June; economists now forecast a contraction of -0.4%.
Australian Dollar The Australian Dollar strengthened by around 0.4 cents against the Pound on Friday as market sentiment towards Sterling soured in the face of renewed dovish Bank of England fears. The Antipodean currency continued to gain support from traders who were rejuvenated by the unexpectedly strong uptick in Chinese Manufacturing this month.
New Zealand Dollar The New Zealand Dollar remained especially susceptible to Federal Reserve tapering rumours on Friday and sunk to a -0.8 cent daily loss against the Pound. With a rate hike seemingly taken out of the equation by the Reserve Bank of New Zealand's latest mortgage lending limit legislation, demand for the 'Kiwi' currency was decidedly weak on Friday. 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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