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 • Sterling up on strong Construction data - new house-building up 19.4%.
• GBP/EUR rallies to 8-month high - German Chancellor candidate gives critics the finger.
• GBP/USD at 8-month high - US Retail Sales miss forecasts.
• Larry Summers pulls out of Fed Chairman race - risk sentiment jumps as taper estimations recede.
Sterling More decent UK data boosted demand for the Pound on Friday as it became apparent that house-building activity picked up rapidly during July. The Office for National Statistics reported that the UK Construction Sector expanded by 2.2% in July, helped massively by a 3-year high 19.4% acceleration in New Housing. The latest release suggests that third quarter GDP is likely to improve on Q2's 0.7% and could even surpass the 1.0% mark. Subsequently Sterling managed to post substantial gains against all of its major currency rivals.
Euro The Pound rose to a fresh 8-month high against the Euro on Friday as the British economy was seen to be picking up momentum with every new data release. Across the Channel in the Eurozone it was reported that employment shrunk by -0.1% in the second quarter of the year, which was a mild improvement on Q1's contraction of -0.4%, a group of Eurozone Finance Ministers declared that the crisis is not over, but did mention that a "gradual economic recovery is taking route in Europe", and Portugal was told to stick to its budget deficit cutting targets. Additionally, the main challenger to Angela Merkel's Chancellorship in Germany, Peer Steinbrück of the SPD party, caused a bit of a stir in the German press by posing for a photo with an aggressive facial expression and his middle finger raised to the camera. The image, dubbed the "stinkefinger" on twitter, was seen by many to mark the end of Steinbrück's credible candidacy for Chancellor, however, the SPD leader actually gained ground in the opinion polls following the media storm.
US Dollar Sterling is currently trading at the best rate of exchange against the US Dollar since the 18th of January. GBP/USD rallied by around 0.8 cents on Friday as robust British data replenished market optimism towards the Pound and Sterling rallied by a further 0.7 cents when markets re-opened for the week earlier this morning as risk-hungry Asian traders speculated that the Federal Reserve may only announce a small, symbolic, tapering of asset purchases later this week in response to the news that Larry Summers has pulled out of the race to replace Ben Bernanke at the Chairman of the Federal Reserve. On Friday another dud American data release - this time in the form of a below forecast US Retail Sales print of 0.2% - caused investors to reduce their estimations for how much the Fed will reduce its monthly asset purchases by on Wednesday evening. Prior to the soft Retail Sales figure a tapering of around $10-15 billion was anticipated, but following the underwhelming result markets now expect a minor reduction in the region of $5-10 billion. With Larry Summers, who is keen to reduce QE3 swiftly, out of the picture it is less likely that the Fed will take an aggressive approach to monetary tightening. It stands to reason that riskier assets will rally if a sizeable chunk is not cut from the Fed asset purchasing target and therefore demand for the safe haven US Dollar tanked when investors began to forecast a relatively small cutback.
Canadian Dollar The Canadian Dollar lost out on around -1.1 cents against the Pound on Friday, slipping to a 3-week low, as the veracity of the UK economic revival was augmented by an impressive 2.2% rise in British Construction output. The Canadian Dollar is susceptible to further weaknesses this winter as US gasoline supplies are set to follow their usual pattern of tailing off towards the end of the year when the summer driving season ends. With oil inventories rising and crude prices tumbling, crumbling demand for Canada's largest export is likely to spell trouble for the commodity-sensitive 'Loonie'. Of course this seasonal phenomenon is not guaranteed to take place but if the situation unfolds as expected GBP/CAD could rally towards a fresh 3.5-year high.
Australian Dollar Sterling strengthened gradually throughout the day against the Australian Dollar on Friday, however, the Pound's 1-cent gains were swiftly erased at the beginning of the Asian session as traders reacted to the news that a well-known hawk Fed policymaker has pulled out of the running to become the next Chairman of the US Central Bank. The US Dollar tanked across the board as global risk appetite soared, which gave rise to an instant 1-cent jump in GBP/AUD.
New Zealand Dollar Following a similar trajectory to its neighbouring Antipodean currency, the New Zealand Dollar lost out on around -1.25 cents to the Pound on Friday before clawing back those losses during the Asian session as Fed Chairman candidate Larry Summers withdrew his application. 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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