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 trade deficit narrows - Sterling slightly lower vs. most currency peers.
• Euro susceptible to ECB easing - liquidity boost could devalue single currency.
• GBP/USD up 2.5 cents last week - UK CPI could make or break Sterling rallies.
• Chinese Industrial Production excels - up 9.7%, boosts risk appetite.
Sterling Following four days of gains for the Pound against most of the majors Sterling cooled off a little on Friday as traders opted to lock-in profits. The Office for National Statistics released another optimistic report on the UK economy, showing that the trade deficit narrowed sharply in June, but it was not enough to sustain the Pound's impressive performance through the final day of the week.
The ONS reported that the British trade deficit fell to a near-one-year low thanks to a rise in total exports of goods to £26.9 billion during June. The data release was especially encouraging because it detailed that exports to countries out of the European Union increased by 10.4%, backing up suggestions from the impressive Manufacturing PMI report that orders to new markets are beginning to pick-up. Crucially, this shift in trading patterns offers hope that the British economy could be in the process of rebalancing towards export-growth rather than being limited to domestic consumption - something that is unlikely to fuel a sustained recovery due to the UK's endemic problem of falling real wages.
Euro It was fairly quiet on the economic data release front in Europe on Friday; French factory output was reported to have fallen by -1.4% during June but that was about it. Greek Prime Minister Antonis Samaras told reporters that the recession-ridden Hellenic nation "looks good compared to the region", and US President Barack Obama commented that its "important that growth and jobs are a focus" for Greek leaders. Whilst Obama's remarks will resonate clearly among those who are opposed to the tough austerity measures imposed on most of southern Europe by the troika, it is difficult to imagine anybody who would argue that Greece - the economic laggard of the Eurozone - is anything but the figurative 'poor man of Europe'.
GBP/EUR rallied by around 0.2 cents and, with the Euro struggling against both the traditional safe havens and the famously high-risk currencies, it is possible that Sterling could strengthen further in the near future. Markets appear to be concerned that the European Central Bank is about to introduce a new liquidity scheme aimed at boosting lending in the currency bloc. This mild form of monetary easing would most likely be considered bearish for the single currency and could lead to another move higher for the Pound.
US Dollar Sterling slid lower against the 'Greenback' by a subtle -0.3 cents on Friday as profit-taking stances allowed the US Dollar to halt the Pound's weeklong stampede. Hopes or fears - depending on which side of the Atlantic you live on - that the Federal Reserve will taper asset purchases in September continue to restrain GBP/USD rallies, but with UK economic data printing decidedly stronger-than-expected last week the Pound is currently over two cents better off against the US Dollar.
UK inflation data, which is expected to show a slight downward deviation in CPI from 2.9% to 2.8%, is shaping up to be the most influential release during the first few days of the week. A print inline with economists' expectations could weaken the Pound but an overachieving score, would carry significant potential for Sterling rallies.
Canadian Dollar The Canadian Dollar fought its way to a one-cent daily gain against the Pound on Friday despite a disappointing domestic jobs report. Statistics Canada reported that the Canadian Unemployment Rate inched higher by 0.1% to 7.2% in July as a shock -39,400 rise in joblessness reflected poorly on the state of the Canadian labour market. The 'Loonie' declined upon the release of the figures, but quickly rebounded as traders opted to focus on strong data out of China, which boosted demand for Canada's largest export - crude oil.
Australian Dollar Global risk sentiment was fanned higher by the flames of the Chinese dragon on Friday as Industrial Production in the world's second largest economy printed well above analysts' forecasts July. The five-month high factory output score of 9.7% smashed expectations of 8.9% and renewed hopes that China is still on track to post growth above the government's target of 7.5% this year. As long as the Chinese economy continues to expand at a rapid pace, the nation's wide-stretching demand for Australian mining products is likely to maintain a relatively strong 'Aussie' Dollar.
New Zealand Dollar The Pound lost out on around -1.5 cents against the New Zealand Dollar on Friday as robust Chinese factory output data bolstered investors' demand for riskier assets - especially assets affected by the commodity market such as the 'Kiwi' Dollar. 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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