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 Unemployment remains at 7.8% - Jobless Claims decline -29K.
• BoE split over guidance - Sterling rallies.
• Eurozone GDP strikes 0.3% - currency bloc returns from recession.
• US PPI stagnates - GBP/USD up 0.7 cents.
Sterling The Pound strengthened broadly yesterday thanks to some encouraging Unemployment data and an interesting Bank of England Minutes report. The headline Unemployment Rate remained at 7.8% in the three months to June, however, it was reported that a stronger-than-expected 69,000 people found work during the period surveyed. Furthermore, a separate report showed that Jobless Claims fell sharply by -29,200 in July, reflecting positively on the recent uptick in British data. The jobs data was interpreted as good news for the Pound, but with the UK population increasing rapidly it could be a long time before the Unemployment Rate falls to the BoE's 7.0% threshold. To illustrate the problem: the number of people with jobs in Britain has almost returned to is pre-crisis peak, yet the Unemployment Rate is still -1.4% lower than it was in 2007 due to the growing population.
Sterling traded higher in the aftermath of the BoE Minutes report as investors pushed forward their interest rate hike bets upon hearing the news that one policymaker, Martin Weale to be specific, voted against last week's forward guidance measures. The UK Central Bank expects that the current record-low base rate of 0.50% will remain in place until 2016, however, with Weale gunning for a shorter time period of ultra-low interest rates, markets have now priced-in a rate hike during 2015.
Euro After six consecutive quarters of contraction the Eurozone emerged from recession yesterday with a second quarter GDP print of 0.3%. Driven largely by the outperforming German economy, and a surprise 1.1% improvement in Portugal, the currency bloc expanded slightly faster than economists had predicted. German GDP grew by 0.7% in the second quarter as the 17-nation bloc's star performer got back on track with strong export growth and decent Construction data. However, as seasonal variations are removed from the picture in the second half of the year, more subdued growth of 0.3%-0.4% is expected.
Despite the better-than-anticipated Eurozone growth report the single currency tumbled further against the Pound. GBP/EUR rallied by over half a cent to reach a fresh 7-week high.
US Dollar Sterling strengthened by around 0.7 cents against the US Dollar yesterday as traders saw an improved chance of higher interest rates in Great Britain due to comments in the Bank of England's latest Minutes report. The 'Greenback' was also held back by a disappointing Producer Price Index report, which pointed towards another month devoid of inflationary pressures. The monthly PPI index stagnated at 0.0% in July, compared to predictions of a 0.3% rise.
Although the factory gate inflation indicator has not generally had a strong impact on the US Dollar over the past few years, the fact that PPI didn't increase suggests that this afternoon's CPI print might also disappoint expectations. If the annualised US Consumer Price Index rises from 1.8% to 2.0% as expected the probability of tapering from the Federal Reserve will greatly improve, but if CPI stagnates then support for the US Dollar may recede slightly.
Canadian Dollar Buoyed by robust employment figures and a dissident Central Banker, the Pound appreciated by around 0.6 cents against the Canadian Dollar yesterday. With US inflation data stalling - signalling that QE3 may last a little longer - and Eurozone GDP improving - good news for commodity prices - Sterling's gains yesterday suggest that traders anticipate further Sterling rallies over the next few weeks.
Australian Dollar The Australian Dollar remained relatively firm against the Pound yesterday as downbeat US Producer Price data gave high-risk assets hope that the Fed may keep its electronic printing press running at full speed through September.
New Zealand Dollar The New Zealand Dollar clawed back around 0.6 cents from the Pound yesterday as markets reacted to news that Retail Sales in the island economy expanded by 1.7% in the second quarter. The better-than-expected print boosted the Antipodean currency because it sparked a new wave of interest rate hike speculation. The 'Kiwi' Dollar advanced against the majority of its most traded peers. 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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