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Australian Dollar (AUD) Firms, Rand (ZAR) Declines, UK Economy has More Slack

Published: 5 Aug at 12 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Russia, South Africa, Switzerland, Portugal,

Pound (GBP)

Tuesday has seen the publication of highly influential former official, David Blanchflower’s, most recent paper claiming that the Bank of England (BoE) are failing to acknowledge the amount of slack left in the UK economy. Bloomberg stated Blanchflower’s suggestion: ‘The Bank of England is underestimating the amount of spare capacity in the economy, and weak wage growth should allow it to maintain stimulus.’ The Pound has been trading strongly in the currency market of late; however, the last few weeks have seen Sterling lose some popularity against other majors and consequently drop; currently trading at 1.65853 against the US Dollar (USD).

Euro (EUR)

The Euro (EUR) has experienced severe volatility in recent weeks amid the geopolitical clashes that have occurred since rebels in Ukraine shot down the passenger flight from Holland to Malaysia, supplied with equipment from Russia. As sanctions against Russia are enforced, the Eurozone recovery remains volatile and eyes are on the European Central Bank (ECB), following their movements for helping the recovery. At present, Portugal are bailing out the recent bank (Banco Espirito Santo) that crashed causing fear amid investors that the Eurozone was unstable. Expert in the field Nicholas Spiro commented: ‘Once more it is a state sponsored bailout, which is precisely what Eurozone leaders were trying to avoid.’ The current EUR to USD exchange rate resides at 1.3420.

US Dollar (USD)

The US Dollar (USD) will see an influential day on Tuesday with the publication of Factory Orders and Non-Manufacturing Composite Index figures. The Composite Index is forecast to reach 56.5 in July, higher than June’s 56.0 showing more productivity in purchasing and supply. Wednesday will see the release of US Trade Balance data whilst Initial Jobless Claims and Continuing Claims figures are set to be published on Thursday. The US Dollar is trending at 0.5933 against the Pound (GBP) and 0.7452 versus the Euro (EUR).

Canadian Dollar (CAD)

The Canadian Dollar (CAD) is trading against the US Dollar at 0.9159 on Monday, between the ranges of 0.9158 and 0.9173 this session. Canada will experience a quiet day by way of data releases on Tuesday, however; Wednesday will see the release of the Canadian International Merchandise Trade report and Thursday will see the publication of Building Permits and the Purchasing Managers Index figures.

Australian Dollar (AUD)

Australia published the Performance of Service Index on Tuesday morning, which reached 49.3 in July, hovering just below the 50 benchmark that indicates expansion. Meanwhile Trade Balance figures were also published, which attained, a highly favourable, yet unexpected -1683M, in comparison to the forecast -2000M. Tuesday has been influential for the ‘Aussie’ with the Reserve Bank of Australia deciding to keep their current interest rate of 2.50% in existence, however, some believe that the Reserve Bank of Australia may need to raise rates within the next year, as the economy couldn’t sustain it in 2014. Economist for HSBC Paul Bloxham commented: ‘Part of the reason is simply that the pace of the recovery around the turn of the year was unlikely to be sustained, but it also reflected the sharply negative effect the governments May budget has on consumer sentiment.’ The present Australian Dollar (AUD) to US Dollar (USD) exchange rate rests at 0.9338.

New Zealand Dollar (NZD)

Tuesday will prove influential for the New Zealand Dollar (NZD) as highly significant Employment Change figures are published alongside Unemployment Rate statistics. The Unemployment Rate data is expected to contract to 5.8% in the second quarter, down from 6.0% in the first. The ‘Kiwi’ has softened in recent weeks as the prices of commodities fell when large dairy companies slashed the amount they were willing to pay farmers for their dairy produce. The New Zealand Dollar is presently trading at 0.8529 against the US Dollar (USD).

South African Rand (ZAR)

The Rand (ZAR) has experienced volatility of late, engulfed by strike action in South Africa which has left the economy fragile. Some employers have now resorted to locking out the formerly striking employees, claiming that they will not agree to a 10% raise, and will only offer 7%; despite agreements being signed. Employers are expected to have locked out up to 80,000 employees as the disagreements continue. The US Dollar (USD) rests at 10.6570 against the Rand.
As of Tuesday, 5th August 2014, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.2626, GBP USD exchange rate was 1.6881, GBP AUD exchange rate was 1.8147, GBP NZD exchange rate was 2.0008, GBP CAD exchange rate was 1.8505, GBP RUB exchange rate was 60.8054, GBP ZAR exchange rate was 18.1527, and GBP CHF exchange rate was 1.5354.
Dominic Lee About Author: (474 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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