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 CPI inflation down slightly in August – prints at 2.7%.
• German ZEW survey comes in at 4-yr high – Euro rallies 0.2 cents.
• US CPI slides to 1.5% – taper decision on tap.
• RBA still willing to reduce rates further – weaker 'Aussie' desirable.
Sterling The Pound ran into a bit of trouble yesterday as UK Consumer Price Index data showed that inflation tumbled slightly during August. Falling from 2.8% to 2.7%, the reading was bang inline with investors' forecasts and was seen to make an early interest rate hike a little bit less likely. Sterling's losses were more pronounced against the high-risk currencies but the Pound remained relatively stable against the Euro and the US Dollar. The CPI report showed that falling motor fuel prices and lower airfares were the main driving force behind the slender drop in Consumer Prices. Disconcertingly the Retail Price Index, which is calculated slightly differently and includes mortgage interest costs and council tax, actually rose during August: from 3.1% to 3.3%. The discrepancy between the two inflation indicators raises questions over the credibility of each; especially when you consider that government outgoings such as pensions are linked to the lower CPI reading, whilst government receipts such as taxes are linked to the higher RPI score.
Euro Sterling slid by around 0.2 cents against the Euro yesterday as falling CPI cooled BoE rate hike speculation and robust German ZEW data reflected optimistically on business sentiment in the Eurozone's largest economy. The Economic Sentiment ZEW survey printed at 49.6 yesterday; its highest score since 2009 and significantly stronger than August's reading of 42.0. The sanguine data release illuminates the extent to which German businesses are benefitting from both robust domestic growth and improving confidence in the currency bloc as a whole. It was also reported yesterday: that the 17-nation bloc posted a trade surplus of €18.2 billion in July; that bicycles outsold cars in Spain during 2012; and that European Commissioner José Manuel Barroso believes that "there is light at the end of the tunnel" for Greece – despite the fact that Greek Youth Unemployment is currently running at 62.9% and primary schools are being forced to close two-and-a-half hours early every afternoon due to teacher cutbacks.
US Dollar Sterling remained in close contact with the US Dollar yesterday as both the UK and the US were treated to falling CPI inflation figures. The American inflation indicator fell from 2.0% to 1.5% in August, marking a slightly larger deceleration than most economists had expected. A -0.3% monthly shortfall in gasoline prices contributed to the soft CPI reading. All eyes and ears will be focussed on the Fed's monetary policy meeting later this evening in which the US Central Bank is likely to announce a small, but symbolic, reduction to its monthly asset purchasing programme. Due to the plethora of variables, it is hard to speculate on the outcome, however, it is plausible that the Fed will unveil a tapering of around $5-10 billion, which carries the possibility of GBP/USD strength: the lower the cutback, the weaker the implication for the 'Greenback'.
Canadian Dollar The Pound traded with a negative bias towards the Canadian Dollar yesterday as soft UK Consumer Prices and decent Canadian Factory Sales weighed on GBP/CAD. Domestic Factory Sales in Canada climbed 1.7% in July, the most for 5 months and far more than markets had been anticipating, and this helped to increase demand for the 'Loonie'.
Australian Dollar The Australian Dollar struggled against the Pound during yesterday's Asian session as the Reserve Bank of Australia repeated its stance that interest rates could be reduced further in the future and that a weaker domestic currency would be beneficial to the economy. However, GBP/AUD shot lower by around -0.7 cents upon the release of the mild drop in UK Consumer Prices as the highly volatile 'Aussie' took advantage of the slight drop-off in BoE rate hike bets.
New Zealand Dollar Sterling lost out on around -1.7 cents against the high-yielding New Zealand Dollar yesterday as demand for the Pound waned and UK inflation ticked lower. It is also possible that some traders were positioning themselves for a slightly more dovish Federal Reserve monetary easing decision later on this evening. 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,
TorFX Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions. Unauthorised copying or re-wording of this content is prohibited. The copyright of this content is owned by Tor Currency Exchange Ltd. Any unauthorised copying or re-wording will constitute an infringement of copyright. | 
No comments:
Post a Comment