Daily Currency Update

Get access to our expert daily market analyses and discover how your currency has been tracking with our exchange rate tools.

Demand for USD continues to end of the month.

By Hamish Muress

With the Bank of England decision just around the corner (Thursday) the pound is in real dire straits and in need of some positive news. In the space of three weeks, the pound has lost over 3.75% against the USD and is now looking at lows not seen since the middle of August. We would normally expect some action from the central bank tomorrow with wage growth outstripping inflation and growth tickling higher, however with Brexit lingering around the corner no action is expected and thus no reprieve for the pound. The Quarterly Inflation report also set to be released tomorrow will provide an update on the Bank’s view on growth which may be revised northwards.

The demand for the USD continues and it is not just against the pound that it is surging. The USD/JPY has held the 113 level whilst the USD Index, an index of the dollar against a basket of other currencies, is at year highs. With the new month just around the corner as well, Friday as always will see the release of important jobs data from the US as well which could see further dollar gains. In the meantime, Donald Trump has become a serious market analyst tweeting yesterday that if the Fed ‘backs off and starts talking a little more Dovish, I think we’re going to be right back to our 2,800 target for the S&P’. Whilst Trump was lifting some of these ideas from Wells Fargo what is interesting is that the recent economic performance and strength that we have seen over the last 18-24 months will be something that Trump campaigns heavily on at the mid-terms.

The bad week continues for the Euro as yesterday’s GDP figures missed expectations across the board. Italy’s growth rate fell to a modest zero, in a blow to the government’s plans to kick start the economy and it would appear that the trade protectionism coming out of the US is beginning to take hold in Europe. There may not be much hope in sight or a recovery soon either with economic confidence in Europe also dropping off and missing expectations.

Australian CPI figures missed expectations overnight for the third quarter coming in at 0.4% versus an expectation of 0.5%. For the year however, the numbers were consistent and relatively positive at 1.9%. The busy week will continue for the Aussie with retail sales figures on Friday and trade balance numbers tomorrow.

Bank of Canada Governor Stephen Poloz announced yesterday that Canada was operating close to its near capacity and that its interest rates, which have surged in the last year or so, will need to rise towards a ‘neutral’ rate. Whilst this was nothing new from Poloz and the BoC it did provide some support for the Loonie.

The New Zealand confidence amongst businesses remains flat as shown by the latest ANZ Business Outlook which also showed that residential and commercial construction intentions dropping off a cliff. That’s it pretty much for the Kiwi this week so focus will be elsewhere.