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Rate hike warning sees Sterling bounce to 12 month highs


The Australian dollar enjoyed mixed fortunes through trade on Thursday as investors toyed with moves back through 0.80 US Cents. The currency rebounded early following stronger than expected labour market data, where in, 54,000 new jobs were added amid strong growth in full time employment and participation rates. The Aussie bounced through 0.80 and touched intraday highs at 0.8016 before softer than anticipated Chinese macroeconomic data sets curb upward momentum and investors squared positions leading into an all-important US inflation print. A steady read in core inflation and an uptick in wider consumer prices bolstered the USD and sent the Aussie back below the psychological 0.80 handle to touch intraday lows at 0.7960. Having corrected upward into the open the Aussie now buys 0.7997 US cents as attentions turn to a raft of US activity indicators headlined by Retail Sales. Watch support on moves toward 0.7960 and profit taking on moves through 0.8010. 

The New Zealand Dollar saw a drop of sixty basis points from its high over the past twenty-four hours as an increase in the United States inflation reading sent the Greenback higher. Opening at 0.7245 against its American counterpart, the 0.72 handle was tested in overnight trading with an intraday low of 0.7185. Losses were eventually paired as investors domestically focus on the upcoming election where the latest opinion poll showed a 4% lead by the Labour Party. The New Zealand dollar opens this morning at 0.7230 ahead of the latest release of the Business NZ Manufacturing Index

The Great British Pound contained its upward trajectory against the USD dollar touching a fresh one year high of 1.3405 as the Bank of England Governor Mark Carney said in an interview that the possibility of a rate hike has increased. As widely expected the BoE kept UK interest rates at 0.25% but the hints of rise caused the Pound to rally by as much as 1% against the Greenback. With unemployment reaching 42-year lows and signs of household consumption stronger than expected, If the economy continues to strengthen, we could see a rise as early as December. 

The greenback got a limited boost from local data overnight as the consumer price index rose by 0.4%, versus the 0.3% expected, in the month of August on a seasonally adjusted basis. Core CPI (YOY) came in at 1.7%, matching July's figure, but above the 1.6% estimated. Acceleration of inflation may force the FOMC members to vote in favour of another interest rate hike in December and that will add further strength to the greenback. Looking ahead tonight and attentions will turn to monthly U.S. Retail Sales for August with market expectations of a 0.3% increase in headline retail sales.