Published: 4 Jul at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, France, Germany, Italy, Russia, South Africa,
The Pound has dominated the currency market in the latter half of the week, boosted to its highest level against the Euro in 21 months in the anticipation of UK interest rate hikes and ECB low interest rates continuation.
Bank of Tokyo representative Lee Hardman stated: â€˜The trend is still strongly higher for the Pound. Economic data is consistent with very robust growth.â€™
The UK saw unexpected figures published by way of Construction PMI, reaching a favourable 62.6 from the previous 60. Economists had predicted the figure to contract to 59.8, but such favourable upbeat data has kept the Pound strong against other majors, including the climbing US Dollar.
The Eurozone is consistently seeing a mixed bag of data results fromfor its members and Friday has been no exception. German Factory Orders shrank to 5.5% YoY from the previous 6.6%. The MoM figure resides at -1.7%, from the former 3.4%. Disappointingly German Construction PMI also dropped from 48.1 to 45.5 signalling deeper contraction; however Retail PMI encouragingly rose from 52.5 to 56.2. French and Italian Retail PMI both contracted, however the Eurozone Retail PMI was able to rise from 49.9 to 50.0, reflecting some growth overall.
The Euro however, looks precarious as the bullish Pound advances to its strongest exchange rate in the last 21 months, appreciating to 79.51 pence per Euro. The inability to raise Eurozone interest rates could see the Single Currency remain weak amongst its peers.
Hardman stated: â€˜The downtrend in Euro-Sterling remains firmly in place, reflecting building investor expectations that monetary policy will diverge between the BoE and ECB.â€™
US Dollar (USD)
Friday sees a data-free day for the US this week as 4th July celebrations are underway. Thursday set the US Dollar in good stead with the Unemployment Rate data shrinking, and Change in Non-farm Payrolls jumping an impressive 288K in June, bettering expectations of only 215K and beating Mayâ€™s 224K. The US Dollar now seems in good stead to gain against other currencies providing the favourable US data remains consistent.
With economists now speculating on the speed at which the Federal Reserve will raise interest rates, leading expert in the field Rick Rieder commented: â€˜The Fed will move faster if people think because the data is extraordinarily compelling. If the data continues along the runway that itâ€™s at, thereâ€™s no reason why it canâ€™t move slower.â€™
Australian Dollar (AUD)
The Australian Dollar has tumbled in light of RBA governor Glenn Stevensâ€™ comments suggesting that the â€˜Aussieâ€™ is overvalued. This comes in contrast to economists who have predicted parity with the US Dollar by the end of the year. Stevens claimed that the â€˜Aussieâ€™ was precariously placed ready for a â€˜significant fallâ€™ that had been overlooked by investors.
A representative on behalf of JP Morgan, Ben Jarman stated: â€˜They really do feel they have to keep reminding the market that the Dollar is drifting away from its traditional drivers, particularly as commodity prices have declined. The governor has a high conviction that the Dollarâ€™s fair value is lower and will get there but he might be getting frustrated with how long itâ€™s taking.â€™
The fall in the â€˜Aussieâ€™ has allowed the â€˜Kiwiâ€™ to gain to a three- month high against its Australian counterpart at 93.95 cents this week. However the â€˜Kiwiâ€™ seems unable to breech the 88 cents mark against the US Dollar.
An expert in the industry Peter Cavanaugh stated: â€™There seems to be an amazing degree of resistance at 88 cents, it just does not want to go through there but equally it doesnâ€™t want to go down. â€˜
South African Rand (ZAR)
The Rand has weakened due to the ongoing strike action of metal workers of the NUMSA union. The union are demanding a wage increase of 12-15% along with other working condition requests and a housing allowance. Whilst employers have offered a raise of 10%, production has slowed until a resolution can be met. General Motors, responsible for the production of 50,000 cars per year in South Africa
has had to close awaiting the end of the work stoppage.
NUMSA have also been accused of vandalising power plants, which have responded that such reports were: â€˜part of a cheap ploy by the employers to undermine the integrity of our struggle for a living wage and improved conditions of employment.â€™
With the strikes becoming violent in South Africa, and the police resorting to the use of rubber bullets against strikers blocking entrances to buildings, a swift and peaceful resolution looks to be far away.
The Canadian Dollar has risen slightly Friday due to US market closure for Independence Day celebrations currently residing at 0.9403 against the â€˜Buckâ€™. With strong commodity prices recently boosting the Canadian Dollar, speculation amongst economists to the feasibility of a sustaining a 94 cent â€˜Loonieâ€™ arises.
An iIndustry expert, Camilla Sutton stated: â€˜Every July over the last five years [the â€˜Loonieâ€™] has undergone substantial strength, with an average monthly gain of 3.2%. It has also strengthened seven out of the last ten Julyâ€™s with an average monthly gain of 1.4%. The pattern is not predictive but does suggest that there could be underlying reasons why [the Canadian Dollar] has tended to rally.â€™
As of Friday, 4th July 2014, the Pound Sterling currency rates mentioned within this news item were as follows:
GBP EUR exchange rate was 1.2623, GBP USD exchange rate was 1.716, GBP AUD exchange rate was 1.8324, GBP NZD exchange rate was 1.9634, GBP CAD exchange rate was 1.8277, GBP RUB exchange rate was 59.0131, and GBP ZAR exchange rate was 18.4593.