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 • BoE holds rates at 0.5% – UK Gilts rise past 3%.
• ECB refrains from further stimulus – dovish comments of rate cut discussion hurt Euro.
• GBP/EUR at 4-month high – GBP/USD down -0.25 cents.
• US Services data prints at 7-yr high – BoC holds 1% benchmark rate.
Sterling To a chorus of yawns the Bank of England announced yesterday that interest rates will remain at the current record low of 0.50% through September – a given considering the Central Bank's forward guidance policy to keep rates low until the Unemployment Rate falls to 7.0%. The BoE also said that the asset purchasing target will not be increased from its current level of £375 billion – this was also widely anticipated given the strength of recent UK data. With British PMI data printing at excellent levels again this week, it is possible that UK GDP could surpass the 1.0% mark in the third quarter; if the economy continues to expand at this speed it is probable that the BoE may be forced into raising rates earlier-than-forecast. The yield on UK 10-year Gilts rose to a fresh 2-year high, above 3.0%, during the afternoon as traders interpreted the Bank's lack of dovish rhetoric – no statement was given – as a sign that rates will be hiked ahead of schedule. Euro The European Central Bank also opted to keep rates unchanged in September: holding the benchmark interest rate at 0.50%, the marginal facility rate at 1.0% and the deposit facility rate at 0.0%. However, the Euro was not as lucky as the Pound, in that the ECB did release an accompanying policy statement. Sterling rallied by around half a cent to a fresh 4-month high as ECB President Mario Draghi admitted that the Governing Council had discussed cutting rates even lower. Draghi reiterated his stance of the last two months, that interest rates will remain at the current record low, or lower, for the foreseeable future. The single currency was also hurt by comments that growth risks remain to "the downside", despite the recent uptick in Eurozone data results. In light of the ECB statement some traders now expect rates to be taken lower before the end of the year. When the Federal Reserve eventually slows down its QE3 asset purchasing scheme, the subsequent drop-off in global liquidity is likely to send market rates across the 17-nation bloc a little higher. In order to keep credit affordable to consumers and businesses it stands to reason that the ECB could conceivably ease policy further with another rate cut. US Dollar Sterling rallied by around 0.4 cents at around midday yesterday as investors reacted to the BoE's decision not to talk down the British economic recovery – something it opted to do in July to temper rate hike speculation when UK data begun to impress. It seems that the latest positive data stream is, in fact, considered decent by historical standards. However, the US Dollar roared back into life during the New York Session as bullish Dollar traders reacted to a -9,000 fall in the Jobless Claims count to 323,000. With the four-week average jobless total now at the lowest level since October 2007, the prospect of the mythical 'Septaper' is looking increasingly likely. The 'Greenback' was also boosted by a 7-year high ISM Non-Manufacturing sector print of 58.6. The report, which measures Service Sector activity, confirms that August was the best month for global private sector growth for two-and-a-half years. It also suggests that the US is on course for annualised growth of around 4.0% in the third quarter. GBP/USD ended the day around a quarter of a cent down ahead of this afternoon's highly anticipated US Non-farm Payrolls report.
Canadian Dollar The Canadian Dollar advanced by around 0.2 cents against the Pound yesterday as American legislators took the first step to approve a military strike in Syria, which drove crude oil prices higher and therefore bolstered the appeal of the 'Loonie'. Investors are also hopeful that this afternoon's labour market data will reverse a string of less-than-impressive domestic data results: the Net Change in Employment is forecast to have rebounded from -39,400 to +20,000 in August.
Australian Dollar GBP/AUD snapped four days of declines and posted a 0.3 cent improvement yesterday as US data bolstered Fed taper bets and further Syrian concerns also ate a bite out of risk appetite. The Australian Trade Balance unexpectedly slipped into negative territory, at A$-765 million during July, which also dampened demand for the 'Aussie' slightly.
New Zealand Dollar The Pound to New Zealand Dollar exchange rate yoyo-ed up and down yesterday by just over a cent, but ultimately GBP/NZD closed for the day at a very similar level to where it began. 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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