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 • UK Manufacturing PMI still strong - prints at 56.7.
• Euro down on German Unemployment - ECB to hold rates but Draghi comments could undermine common currency.
• GBP/USD at 9-month high - US Manufacturing provides glimmer of hope.
• RBA holds 2.5% interest rate - talks down future rate cuts.
Sterling Markit released a report yesterday showing that UK Manufacturing activity in the third quarter accelerated at its fastest rate for two-and-a-half years. Although September's score of 56.7 is slightly weaker than August's 57.1, the report showed that growth in Output and New Orders remained close to August's 19-year highs. The PMI result suggests that goods production will provide a major boost to UK GDP and bodes well for future Sterling performance. The only negative to come from the report was that Overseas Exports did not rise as quickly as could be expected, especially considering that Britain's largest export market - the Eurozone - has recently emerged from recession.
Euro Sterling struck another 8-month high against the Euro yesterday, touching a level not seen since the middle of January, as a combination of softer-than-expected German employment numbers and a slight deceleration in Manufacturing output in the currency bloc hurt demand for the single currency. The headline German Unemployment Rate took an unexpected turn for the worse in September, rising from 6.8% to 6.9% as 25,000 Germans found themselves out of work - five times as many as the 5,000 that markets had pencilled in. Despite the downbeat score in the 17-nation bloc's most influential labour market, jobless activity across the Eurozone actually improved in September as the Unemployment Rate fell to 12.0% - which, I hasten to add, is still catastrophically high. The Eurozone Manufacturing PMI came in at 51.1, showing that output growth is not gaining momentum across the Channel in the same manner that it is here in Britain. This afternoon's European Central Bank rate decision could damage the Euro further if President Mario Draghi slips in any further hints at another rate cut, or another injection of LTRO liquidity measures. A rate cut from the current 0.50% level is unlikely, but not implausible, at this juncture.
US Dollar With the probability of the Federal Reserve tapering its asset purchasing scheme shrinking by the minute while the American government is shutdown, the Pound managed to strike a fresh 9-month high against the US Dollar yesterday. However, GBP/USD gave back some of its gains during the afternoon as it was reported that Manufacturing activity in the world's largest economy expanded at the fastest pace since April 2011. The 2-year high PMI result of 56.2 cheered the downtrodden Dollar slightly, but with Friday's crucial Non-farm Payroll report unlikely to be released on time, investors are increasingly beginning to readjust their pricings of the 'Greenback' to reflect the view that asset purchases may not be slowed during 2013 after all: with no data to go by, how can the Federal Reserve gauge that the US economy is strong enough to warrant a reduction of stimulus?
Canadian Dollar The Canadian Dollar slipped to another fresh 3.5-year high against the Pound yesterday as the US budget debacle spooked investors out of the North American currency. Canada and the US share very close trade links and as a result markets were wary that a prolonged period of government shutdown south of the border could lead to reduced economic output in Canada and this damaged the 'Loonie'.
Australian Dollar The Australian Dollar rallied by around 1.5 cents early yesterday morning as the Reserve Bank of Australia opted to maintain its current benchmark interest rate of 2.50%. The 'Aussie' strengthened as traders perceived RBA Governor Glenn Stevens' remarks that previous rate cuts - the Central Bank has cut rates 8 times from 4.75% since late 2011 - were still working their magic, to mean that the easing cycle could be placed on hold for the foreseeable future.
New Zealand Dollar The Pound posted a one-cent daily gain against the New Zealand Dollar yesterday as traders reacted to the latest in a long run of positive UK PMI results. 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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