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 inflation data due out - strong score will boost GBP.
• Eurozone set to post growth in Q2 - the road to recovery is long and winding.
• Fed taper bets come back to haunt GBP/USD - Dollar rallies 0.5 cents.
• Risk sentiment down on Fed concerns - AUD & NZD down vs. Sterling.
Sterling After a tumultuous two weeks of trading in forex markets this week's session began in subdued fashion yesterday. However, things are likely to liven up later on this morning when the latest CPI inflation data is released. The Consumer Price Index is expected to have fallen slightly during July from 2.9% to 2.8%, bringing inflation back towards the Bank of England's 2.0% target. If the figure prints inline with economists' forecasts then Sterling is likely to decline mildly, a weaker-than-anticipated print has the potential to seriously hamper demand for the Pound but if inflation remains sticky then investors may push forward their bets of an interest rate hike and this could prove bullish for the UK currency.
Euro The Pound gained some ground against the Euro yesterday as markets continued to punish the single currency for the European Central Bank's perceived inclination to ease monetary policy. With ECB Chief Mario Draghi expressing his concerns over credit growth during his most recent press conference speculation has started to grow that he intends to unleash a new bout of liquidity boosting measures in the near future.
However, the Euro clawed back its losses during the afternoon as traders priced in the possibility that the currency bloc could have emerged from recession in the second quarter. Data released later this morning is expected to show that the Eurozone expanded by a modest 0.2% in Q2, which would mark the first quarter of growth since 2011. No doubt the French will be drinking wine, the Germans will be eating Bratwurst sausages, and the Spanish will be cooking up paella but in all honesty there is a long way to go before economic conditions in the Eurozone really warrant a celebration.
US Dollar Somewhere in the mind of each and every financial trader on this planet there is a small room with white walls, a square wooden table and a record player in it. The record player has a vinyl disc stuck on repeat with the words: "FED TAPER?" written in bold type. This nightmarish image has been popping up inside investors' heads ever since Federal Reserve Chairman Ben Bernanke commented back in May that asset purchases could be slowed. It brings fits of fear and dread to those who see it - apart from US Dollar bulls - and it leads to a stronger US Dollar as markets position themselves for a risk-averse world devoid of Fed stimulus.
It appears that with US CPI inflation set to rise, US Retail Sales forecast to show decent growth and the University of Michigan Confidence index likely to improve this week, the recurring image appeared a lot yesterday as the prospect of accelerating American productivity led to a renewal of Fed taper speculation. In reaction to the fear that global liquidity could take a hit the Pound declined by around half a cent against the safe haven US Dollar.
Canadian Dollar The Canadian Dollar rose by a negligible 0.1 cents yesterday as a dearth of fresh economic data failed to ignite any meaningful volatility in the GBP/CAD pair. Whilst prospective positive US data releases later this week could reflect favourably on the Canadian economy and its close trading relationship with the 'red-white-and-blue', the 'Loonie' is unlikely to receive massive amounts of support in forex markets as Fed taper speculation hurts risk sentiment.
Australian Dollar The Pound grew by around 0.7 cents against the Australian Dollar yesterday as investors' appetite for riskier assets was dampened by the worrying prospect of reduced asset purchases from the Federal Reserve. Below forecast Japanese GDP data - at 0.6% compared to expectations of 0.9% - also worked against the 'Aussie' yesterday as sentiment in the Asian-Pacific region stalled.
New Zealand Dollar Sterling also appreciated by around 0.7 cents against the New Zealand Dollar yesterday, however a report on domestic inflation, released later this evening, is predicted to show that price pressures accelerated from 0.5% to 1.5% in the second quarter. The bullish indicator could lead to improved bets that the Reserve Bank of New Zealand will hike interest rates in the near future. 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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