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 Minutes show no calls for further stimulus - Sterling rallies.
• GBP/EUR hits 8-month high - Sterling gains shrink following Fed announcement.
• GBP/USD up 2.3 cents - as Fed refrains from cutting asset purchases.
• GBP/CAD hits 45-month high - New Zealand GDP slightly stronger than forecast.
Sterling Sterling soared across the board yesterday morning as the Bank of England's latest Minutes report showed that no policymakers voted for additional stimulus in September. The Monetary Policy Committee struck a positive tone with regards to the UK economy and increased their third quarter growth forecast from 0.5% to 0.7%. However, with PMI data printing as robustly as it has done in the last few months, some analysts believe that UK GDP may even accelerate to around 1.0%. The BoE noted that the current level of optimism would only continue if British data remains resilient, but the overarching message was positive and this bolstered demand for the Pound: "Were the recovery to falter, the case for further asset purchases would be stronger. But no member judged that further stimulus was appropriate at present".
Euro The Pound to Euro exchange rate struck a fresh 8-month high yesterday in reaction to the BoE's latest Minutes report, which was considered slightly more hawkish than markets had expected. Earlier this week the Costa Concordia, a cruise ship that ran aground last year off the coast of Italy, was successfully refloated from the depths of the Mediterranean Sea. Strangely, Mayor of London Boris Johnson felt it appropriate to compare the UK's nascent recovery to that of the ill-fated cruise ship. Although the nautical metaphor was met with a chorus of cheers and laughter at the annual Institute of Directors Convention in London, the comments seem slightly less jovial when one considers that 32 people died on the ship and rescuers are still attempting to find two of the missing bodies. Furthermore, the comparison seems to overlook the fact that the Costa Concordia was only rescued in order to be broken down for scrap materials. Make of that what you will. GBP/EUR ended the day 0.2 cents higher irrespective of the Mayor's comments.
US Dollar Demand for the US Dollar corroded like chalk placed in acid yesterday as the Federal Reserve shocked markets by announcing that it would not be tapering its $85 billion a month asset purchasing programme in September. Fed Chairman Ben Bernanke said that the Federal Open Market Committee was not sufficiently happy with the current state of the US economy and thus voted against a reduction of stimulus at this juncture: "The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases". The unexpected decision wrong-footed financial traders and gave rise to a maelstrom of market activity: risk sentiment surged, demand for the Dollar plummeted, the Dow Jones hit an all-time high and GBP/USD rose above 1.6000 for the first time since the beginning of the year. With stimulus set to continue at the current pace for at least another month, and quite possibly longer, the Pound completed a 2.3 cent daily gain against the downtrodden US Dollar.
Canadian Dollar Sterling struck a 45-month high against the Canadian Dollar yesterday, advancing by over 1.3 cents, as the Pound received substantial support following the Federal Reserve's shock decision to maintain monetary stimulus. Although the 'Loonie' would usually be expected to rally versus Sterling on the back of such a strong risk-on signal, GBP/USD's huge gains acted to prop-up the Pound against the Canadian Dollar.
Australian Dollar Although the Pound was buoyed by the optimistic BoE Minutes report, Sterling ended for the day -0.4 cents down against the Australian Dollar yesterday as investors grew more hungry for high-risk, high-yield assets in the aftermath of the Fed's announcement.
New Zealand Dollar The New Zealand Dollar appreciated by around a cent against the Pound yesterday as the high-risk currency was boosted by the Fed's surprise decision against the highly anticipated 'Septaper'. The 'Kiwi' Dollar also benefitted from a slightly better-than-expected second quarter GDP report: Q2 printed at 0.2% as forecast, but first quarter growth was upgraded to 0.4%, which brought the annualised figure up to 2.5%. 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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