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 • More BoE QE possible - although unlikely due to economic recovery and high inflation.
• German IFO hits 17-month high - slightly weaker-than-forecast.
• GBP/USD down slightly - 'Octaper' speculation may be unwarranted.
• Canadian Retail Sales up 0.6%- GBP/NZD up 1.3 cents.
Sterling The Pound stuttered somewhat yesterday as outgoing Bank of England Deputy Governor Paul Tucker suggested that the UK Central Bank could provide further stimulus if slack in the domestic economy persists, but only if inflation expectations remain "anchored". Considering that the UK Consumer Price Index has printed above the 2.0% target in each of the previous 45 months, the BoE's definition of "anchored" appears to be fairly ambiguous. However, it is still unlikely that UK gilts will be treated to another yield-destroying dose of QE unless the nascent British revival falls apart at the seams in the fourth quarter. In other economic news it was reported that UK Mortgage Approvals rose to their highest level since December 2009 in August, however, the 38,228 print did not inspire Sterling strength because it was slightly lower than the 38,950 that markets had anticipated.
Euro The Euro managed to post a slender set of daily gains against the Pound yesterday despite a lower-than-expected German IFO Business Climate print of 107.7. It seems that traders were not overly perturbed by the slight deviation from their forecasts, as the score was still the highest for 17 months. As the largest economic force in the currency bloc, Germany is often viewed as a proxy for wider Eurozone output. The latest positive indicator adds weight to the argument that fairly sturdy German growth in the second half of 2013 will lead to a fairly respectable set of GDP results for the resurgent 17-nation bloc. However, concerns that the single currency may be hit with another measure of monetary easing are likely to work against the Euro in the near-term.
US Dollar US Consumer Confidence was reported to have dropped below the 80.0 mark for the first time since May yesterday, however, the US Dollar still registered a 0.3 cent improvement against Sterling as GBP/USD battled with key technical resistance levels. The disappointing Confidence score of 79.7 for September was influenced by a decline in sentiment towards jobs and wages among American consumers. The Dollar-negative effect of the Fed's decision not to taper in September is starting to wear off and there is potential for a GBP/USD reversal if the QE3 saga is subject to another plot twist. However, having said that, recent US data does not support a reduction of stimulus at this moment so any movement in the currency pair is likely to be dictated by market speculation rather than Central Bank action.
Canadian Dollar The Canadian Dollar strengthened slightly against the Pound yesterday as Canadian Retail Sales came in one percentage point higher than forecast at 0.6%. However, the commodity-correlated 'Loonie' was negatively impacted by a decline in crude oil prices. The black gold, which is Canada's most lucrative export, plunged to a 6-week low as fears of a US intervention in Syria faded.
Australian Dollar The Sterling to Australian Dollar exchange rate remained fairly static yesterday as the moderate UK mortgage figures failed to ignite market sentiment towards the Pound, but the 'Aussie' remained constrained by the latest round of Fed taper speculation.
New Zealand Dollar The New Zealand Dollar plummeted by around -1.3 cents against the Pound yesterday as a drop in global equity markets tripped up the high-risk 'Kiwi'. A recent report compiled by Australian trading company CommSec into the price of an iPad in different countries shows that, contrary to the opinion of dismayed Antipodean business owners, the New Zealand Dollar is actually valued fairly in relation to its global currency peers. The light-hearted survey was not designed to alter monetary policy, but it does offer food for thought for the Reserve Bank of New Zealand, who have been strongly urged to weaken the domestic currency in order to improve export competitiveness. 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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