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. Sterling
The Pound maintained its firmer tone yesterday after UK Retail sales data came in significantly better than forecasted. Sales are up 3% compared with last year – the fastest annual rise since January 2011.
The results of this report are no doubt attributed to the recent hot weather, but it's not just disposable barbeques, bags of salad and beer deals that gave sterling a boost, it's the hopes of a sustained economic recovery now becoming reality that has helped the markets.
Investors are increasing their expectations of an interest rate hike. Under its "forward guidance" plan, the Bank of England are anticipated to keep interest rates low until the end of 2016 when it expects the jobless rate to fall to 7%. But a steady improvement in data is leading to doubts whether the guidance plan can keep rates floored for that long.
US Dollar
The Pound climbed towards an 2-month high against the US Dollar after UK retail sales beat forecasts and rose significantly more than expected. The 1.1% increase (the fastest annual rise since January 2011) was no doubt aided by the recent hot weather, and has increased hopes of a sustained economic recovery.
The U.S Dollar reversed gains against the Euro and Yen after speculation that the Federal Reserve could begin reducing stimulus measures as early as next month weighed on demand for US denominated assets. Stocks fell and Treasury Yields reached 2-year highs.
Earlier in the day the Dollar had benefited briefly after positive US Jobless claims data confirmed that the number of applications for unemployment had decreased to the lowest level since October 2007. However any gains were quickly erased after industrial production remained unchanged, highlighting concerns over the weakness of the US economy.
With a quiet economic calendar for the UK and Euro-Zone, markets will be continuing to look for any indications of underlying strength in the US economy today's housing starts data forJuly, as well as the preliminary release of the University of Michigan measure of consumer sentiment for August, will be of interest.
Euro
Yesterday was a quiet day in terms of European economic data, and in this respect the focus remained very much on Wednesday's news that after six consecutive quarters of contraction the Euro-zone had emerged from its longest recession to date.
Reports released over the past few days have been bullish for the euro, with positive GDP results, and a strong outcome for German manufacturing. Euro-zone HICP data due to be released this morning is expected to confirm earlier estimates of a subdued 1.6% inflation rate.
New Zealand Dollar
The New Zealand dollar edged higher against the US dollar following a string of upbeat domestic data including strong consumer confidence and PMI data. Market investors are edging towards a increased return and are placing bets on the kiwi on expectations the RBNZ will raise interest rates.
Australian Dollar
Speculation that the US Federal Reserve may well be set to begin tapering its Quantitative Easing programme as early as September created another bout of selling pressure taking GBP/AUD back above the 1.7000 level. The Australian dollar held steady against the US dollar with the help of iron ore, their single biggest export earner which traded up towards a 5 month high. Even after the RBA opted to decrease interest rates many analysts are under the impression that another interest rate decrease may be necessary.
Canadian Dollar The Canadian dollar pulled back during trading yesterday following the release of improved weekly jobless claims numbers from the United States. Speculation over a reduction in QE from the Federal Reserve helped Sterling gain against the CAD taking the rate up towards 1.6100 against the Pound. However, a strong showing from today's Michigan Confidence survey in the U.S could have the opposite effect on GBP/CAD, provoking renewed support for the Loonie and sending the pair back down towards its key interim floor of 1.5575 which it touched off at the start of this month. 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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