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 • Carney cautious over UK recovery - says guidance is working to keep short-term rates low.
• Eurozone Industrial Production tanks - Germany leads decline as Q3 growth prospects weaken.
• US Initial Jobless Claims at near-6-yr low - incomplete report ignored by traders.
• Australia loses -10,800 jobs - GBP/AUD records 1-cent gain.
Sterling Yesterday Bank of England Governor Mark Carney gave a speech to the Treasury Select Committee to explain his forward guidance policy. The Central Banker said that his commitment to keeping interest rates at the current record low of 0.50% until the Unemployment Rate falls to 7.0% was keeping short term borrowing rates low for consumers and businesses, even if it was having an adverse effect on longer term market interest rates. Carney warned against complacency and said that the recent surge in UK data could conceivably be another 'false dawn'. The Canadian commented that he would be willing to boost stimulus again if the British economy started showing signs of weakness in the future, however, he also reminded the Treasury that he is the only one of the G7 Central Bankers who has hiked rates in the past.
Euro The Pound to Euro exchange rate floated higher by a mild 15 pips yesterday as Eurozone Industrial Production declined five times faster than economists had anticipated during the month of July. Eurostat reported that output across the Industrial Sector, which includes everything from the production of flashy Ferrari's to the nitty-gritty extraction of oil and gas, tumbled -1.5%, compared to -0.3%, in July. Subsequently, the annualised figure printed at -2.1% compared to forecasts of -0.2%. The downbeat dataset was considered especially worrying for the fact that the decline was led by Germany - the currency bloc's largest and most important economy. The Euro was largely unmoved by the latest literature from the European Central Bank as the Monthly Report for September failed to bring anything new to the table. The ECB mentioned that it is committed to keeping interest rates at the current record low of 0.50%, or lower, for an extended period of time and said that inflation is projected to remain close to the 2.0% target in the medium term. Additionally, the ECB stressed that important structural reforms are still needed to bolster the revival effort across Europe.
US Dollar Sterling struck a fresh 7-month high against the US Dollar yesterday as markets interpreted BoE Governor Mark Carney's comments regarding monetary policy to mean that no further easing is on the cards. GBP/USD yoyo-ed during the afternoon as the latest US Initial Jobless Claims figure came in at the lowest level since October 2007, which spurred hopes of a substantial cutback in asset purchases. However, shortly after the 292,000 print was released it emerged that two states had not contributed to the report, suggesting that the initial figure is artificially low. With the validity of the report shrouded in doubt, investors quickly brought the Pound to US Dollar exchange rate back to the level it was at before the jobless data release.
Canadian Dollar The Sterling / Canadian Dollar exchange rate traded with little directional bias yesterday as domestic data in Canada printed inline with economists' expectations and BoE Governor Mark Carney failed to convince markets that he will be able to keep a lid on interest rates until 2016. The Canadian New Housing Price Index improved from 1.8% to 1.9% as expected and across the border in the States the jobs figures were not considered trustworthy enough to move the market.
Australian Dollar The Pound soared higher by around a cent against the Australian Dollar yesterday during the Asian session as the latest Australian labour market indicators failed to impress. Compared to expectations of a 10,000 rise, the number of people in employment declined by -10,800 in August. The soft jobs figure damaged the 'Aussie' Dollar as investors speculated at the possibility of another interest rate reduction from the Reserve Bank of Australia to help ease the effects of the slowdown in the mining sector.
New Zealand Dollar Sterling proceeded to track lower against the New Zealand Dollar yesterday as traders continued to buy back into the Antipodean currency following the Reserve Bank of New Zealand's hawkish policy statement. With a rate hike of around 50 basis points before the end of Q2 2014 now priced into the market, it is possible that the commodity-sensitive 'Kiwi' Dollar could end its recent run of poor form against the Pound. GBP/NZD is currently 17 cents lower than it was on April 11th. 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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