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?Loonie? Bearish as Oil Prices Return to Downtrend, Euro Climbing in spite of Weakened Eurozone Inflation

Published: 17 Sep at 11 AM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, China,

Pound Sterling
Hawkishness prompted by an unexpected improvement in the UK Unemployment Rate and Average Weekly Earnings data was not as long-lasting as investors might have hoped after today’s domestic Retail Sales proved disappointing. Instead of printing at an increase the year-on-year figure for August fell to 3.5% as sales growth declined, speculated by some to be the result of more consumers waiting to make purchases in the autumn discount session. This somewhat undercut the more bullish comments of Bank of England (BoE) Governor Mark Carney, who had previously suggested that an interest rate hike could come sooner than forecast if domestic data continued to show similar improvement to the labour market figures.

Although Wednesday’s Eurozone Consumer Price Index showed that inflation in the currency union had declined on the year the Euro has, nevertheless, been quick to bounce back. In part this recovery was spurred by the recent affirmations of European Central Bank (ECB) President Mario Draghi that the policymakers would be willing to implement monetary loosening measures in order to support the continued recovery of the bloc. With traders relatively reassured that the strength of the common currency was not substantially threatened by this development the Euro remains on a general uptrend across the board.

US Dollar
While the US Consumer Price Index revealed an unanticipated, slight decline from 1.9% to 1.8% yesterday the impact of this data was primarily felt in its influence upon the rampant speculation surrounding the imminent Federal Open Market Committee (FOMC) meeting. This slightly dovish result would appear to have decreased the chances of a September take-off for interest rates, given the importance of a robust inflation rate in supporting any monetary tightening. Ahead of this evening’s announcement the ‘Greenback’ is holding relatively steady as traders wait for the potentially pivotal FOMC call.

Australian Dollar
The ‘Aussie’ had benefitted from a boost in risk appetite after Chinese markets experienced another rally and commodity prices remained on an uptick, as well as the increasingly strong chance of the Fed opting to leave interest rates unchanged at the September session. However, as the ‘Greenback’ is expected to strengthen regardless of tonight’s result much of that renewed momentum has been lost. Words tomorrow from Reserve Bank of Australia (RBA) Governor Glenn Stevens may prompt the antipodean currency out of bearish territory, particularly if the Fed holds off a little longer on the tightening that will inevitably weigh heavily on the commodity-based economy.

New Zealand Dollar
Overnight the ‘Kiwi’ was sent on a fresh downtrend after the second quarter New Zealand Gross Domestic Product shrank further than forecast to 2.4%. Arriving on the heels of further warnings that the dairy industry is set to experience renewed contraction in the coming months, this worsening picture of the domestic economy saw sentiment towards the South Pacific currency wane.

Canadian Dollar
Volatility remains the watchword for the oil industry today after a large decline in US stockpiles was overshadowed by more weak data from Asia which suggested that global demand is continuing to slow dramatically. As a result Brent crude has fallen back below $50 per barrel, pulling the ‘Loonie’ onto a decided downturn. Should the Fed elect to raise interest rates this evening the Canadian Dollar is likely to fall further as a stronger ‘Buck’ stands to put renewed pressure on commodity markets.
As of Thursday, 17th September 2015, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.3643, GBP USD exchange rate was 1.5574, GBP AUD exchange rate was 2.1701, GBP NZD exchange rate was 2.4458, GBP CAD exchange rate was 2.0508, and GBP CNY exchange rate was 9.9143.
Patrick James About Author: (289 Posts)Patrick completed his economics degree just as the global financial crisis struck in 2008. In the intervening years Patrick has made his mark, climbing to a prominent position within a large financial services provider. As part of his role Patrick uses his expertise to advise companies of the best ways to safeguard against currency risk.

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