Exchange Rate Round-Up: GBP/EUR at 19-Month High, Rand Unstable, US Dollar Softer
Friday shows the British Pound performing stronger than it has been in the last 19 months against the Euro.
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The Pound has climbed 9.1% in the last 12 months, and as UK unemployment dropped more than expected in the three months to April, the potential increase of interest rates is a hot topic.
Bank of England Governor Mark Carney has stated: ‘There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced.’
Carney fears the interest rate climb could trouble households with debt and disrupt the economic recovery. The Pound could grow even stronger today with the result of construction output data being released.
Despite the Euro reaching an almost four-month low after the European Central Bank slashed rates, the US Dollar proved in no position to contest it.
With America’s unfavourable data releases of retail sales and joblessness, the ‘Buck’ found itself in decline.
The Iraq disruption could further harm the consumer spending amount if oil attainment is interrupted, weakening the Dollar even more. Additionally, fears of oil prices remaining high are valid if the conflict is not swiftly resolved.
The Eurozone employment results released on Friday have seen a slight increase, from -0.5% in 2013 to 0.2% in 2014.
This gave the Euro exchange rate a slight boost, although the common currency is unlikely to strengthen.
The Euro has climbed against the ‘Greenback’ after the release of discouraging industrial and production data for the US. Despite this, the Euro has fallen against the British Pound, which is experiencing its strongest relationship with the Euro for 19 months.
Despite initial forecasts putting global economic expansion at 3.2% in 2014, the revised forecast now suggests that only growth of 2.8% is attainable. However, the revision did not affect demand for higher risk assets and the ‘Aussie’ is set to keep rising.
Morgan Stanley has suggested a possible equalisation of the ‘Aussie’ to the ‘Buck’ this year which is currently residing at AUD/USD 0.9410. The Australian Dollar exchange rate has been enhanced this week with excellent results from trading figures with China and positive retail figures.
New Zealand Dollar
The ‘Kiwi’ Dollar has seen strong gains after the Central Bank increased interest rates by 0.25%, making this the third time rate hike in four months.
The New Zealand Dollar has strengthened notably against the British Pound, US Dollar and Euro. There are no more data releases due for the ‘Kiwi’ this week meaning it should hold its strong position; however data released from the UK, US and EU could continue to boost the ‘Kiwi’.
The Canadian Dollar exchange rate has fared well in relation to the US Dollar this week and appears to be improving as the demand for oil has risen with the continuing disruption in Iraq.
With oil being Canada’s largest export, it has seen positive results from the commodity price shooting up to the highest level since March.
An industry expert at Commerzbank AG has stated: ‘The Iraq development is the main driver for oil prices today and increases nervousness over the security of the supply from the country.’
South African Rand
With the possibility the ongoing 20 week mining strike reaching resolution and better than expected mining output data boosting the Rand, the South African asset gained on Thursday for the first time in four days.
Agreements on wages and employment conditions have been resolved, lending a more secure place for the Rand to build from in the coming months.
However, credit rating results will be released today that could unsteady the South African Rand exchange rate.