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. • CBI upgrades GDP forecast - predicts 1.2% expansion in 2013.
• Bundesbank strikes hawkish tone - markets still expect prolonged period of ultra-low interest rates.
• GBP/USD up 0.3 cents - Fed Minutes on tap on Wed.
• AUD & NZD down on Central Bank speculation - Sterling rallies over 3 cents vs. both
Sterling The Pound got off to a good start to the week yesterday as markets reacted positively to an encouraging statement from the Confederation of British Industry. In light of the recent uptick in British economic data, the CBI upgraded its UK GDP forecast for 2013 from 1.0% to 1.2% and revised higher its 2014 growth forecast from 2.0% to 2.3%. Although CBI Director General John Cridland noted that confidence is beginning to grow again across all areas of the economy, he also warned that more business investment is needed to drive the UK towards exit velocity. The news was not considered drastic enough to give Sterling a significant boost but it was sufficient to fan the Pound slightly higher against the majority of the majors. Euro The Euro rallied momentarily yesterday morning as the Bundesbank sounded a far more hawkish tone than was expected with regards to monetary policy in the Eurozone. The German Central Bank commented in its monthly report that a rate hike would be possible if inflation pressures were to emerge. The single currency strengthened by around 0.3 cents against the Pound when the report was released as traders perked up in hope of an early increment to the European Central Bank's record-low 0.50% benchmark interest rate.
However, the Euro gave back its gains during the afternoon as investors dismissed the hawkish German statement as another case of market chatter; with ECB President Mario Draghi taking the unprecedented decision to give traders forward guidance that interest rates will remain low for a "prolonged period of time" during his last two policy meetings it appears unlikely that the Bundesbank's postulation will have any major impact on the ECB's easing scheme. GBPEUR closed for the day up by around 10 pips.
US Dollar Sterling stormed its way to a fresh 2-month high against the US Dollar yesterday, appreciating by around 0.3 cents, as investors continued to throw their support behind the Pound in light of last week's stronger-than-anticipated UK Retail Sales print. The 'Greenback' will likely suffer further declines later this week if the Federal Reserve's July Minutes report is seen to reduce the probability of a slowdown to QE3 in September. However, the US Dollar will probably strengthen if the Minutes show an enhanced desire from Fed officials to taper asset purchases and begin the normalisation of monetary policy.
Canadian Dollar The Pound to Canadian Dollar exchange rate grew by around 0.4 cents yesterday as markets sold the 'Loonie' in anticipation of a poor set of domestic data releases later this week. Canadian Retail Sales are predicted to have shrunk by -0.5% during June and the latest CPI inflation print is expected to come in at an underwhelming score of 1.4%. With private consumption declining and Consumer Prices remaining below target for the 15th consecutive month, the Canadian Dollar is likely to struggle this week if the results come in as expected.
Australian Dollar Sterling bullied its way to a 3.0 cent daily gain against the Australian Dollar yesterday as speculation mounted that the Reserve Bank of Australia will look to reduce the benchmark interest rate to as low as 2.00% over the next few months in order to devalue the 'Aussie' Dollar and increase the competitiveness of the nation's exports. Since the final quarter of 2011 the RBA has cut rates eight times to 2.50%, and since April this year the Australian Dollar has weakened by around 25 cents against the Pound. However, markets still feel that the Antipodean currency is overvalued in relation to the future prospects of the local economy, which is projected to suffer over the next year as the decade-long mining boom comes to an end.
New Zealand Dollar The New Zealand Dollar declined by around -3.5 cents against Sterling yesterday as markets digested comments from Reserve Bank of New Zealand Governor Graeme Wheeler to mean that an interest rate hike may not be necessary. The RBNZ Chief said that the Central Bank is capping the number of low equity mortgages that banks are allowed to approve in order to cap the recent escalation of house prices. It is believed that a scheme of this nature will help to cool the housing market down, therefore negating the need for a higher benchmark interest rate. 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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