Exchange Rates Today: Pound Sterling Strong, Euro Soft, US Dollar Bullish
British Pound (GBP)
The Pound exceeded expectations on Friday after positive results from domestic data publications, and from trader reaction to Scottish Prime Minister Alex Salmond’s admission that Scotland will have an obligation to share the British debt, even if they don’t have the Pound as currency.
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Sterling was also bolstered by a better-than-expected Nationwide House Price Index, which rose by over 10% in the year to August.
There is mounting pressure on European Central Bank policy-makers to begin a sovereign bond-buying programme as inflation in the currency bloc nears a five-year low.
The hope is that if the ECB purchases government debt from Eurozone member states, which would drive down the yields on such assets, it would encourage traders to invest in the real economy.
In theory this should lead to expansive economic growth, cheaper credit and enhanced liquidity.
However, the likelihood of this is minimal after recent comments from the bank suggested no intention to begin an asset purchasing programme in September.
Thursday’s ECB policy meeting will be a pivotal moment for the single currency.
If policy-makers opt to begin a quantitative easing scheme the Euro is likely to plunge further across the board.
There is, however, the potential for the Euro to rebound higher if European Central Bank President Mario Draghi decides to talk down the likelihood of further stimulus.
Sterling rallied by around half a cent against the Euro on Friday to reach a fresh monthly high.
US Dollar (USD)
Despite the positive domestic data publications and the news regarding the Scottish bid for independence; Sterling stuttered close to key resistance against the US Dollar as a result of technical trading patterns.
The US experienced a mixed bag of economic data results on Friday. The Chicago Manufacturing PMI increased from 52.6 to 56.5 in August but the score was almost 8 points below the median market forecast.
The University of Michigan’s consumer confidence leapt from 79.2 to 82.5.
If Monday’s British manufacturing output stays faithful to the forecast figure of 55.1 it is unlikely to push Sterling through resistance against the US Dollar.
Those backing the Pound will be hoping for a better-than-expected result to bolster ‘Cable’ (GBP/USD).
Canadian Dollar (CAD)
In spite of the fact that Canadian Gross Domestic Product showed an expansion of 0.3% in June alone, the Canadian Dollar registered a half-cent decline against Sterling on Friday.
Canadian GDP also showed an impressive 3.1% growth in the 12 months leading up to June, but the ‘Loonie’ (CAD) failed to capitalise as investor focus was elsewhere.
The recent rapid acceleration of US economic output could potentially bolster the Canadian Dollar, and augmented economic growth could cause Bank of Canada Governor Stephen Poloz to consider an interest rate hike.
Australian Dollar (AUD)
Sterling gained around half a cent against the Australian Dollar on Friday, and has continued to push ahead as markets reopened on Monday due to disappointing Australian manufacturing output.
AiG reported that factory output declined to 47.3 in August, down from July’s score of 50.7 as the strength of the domestic currency caused a decrease in new factory orders.
It is unlikely that the negative manufacturing data will influence the Reserve Bank of Australia’s interest rate decision, but it could lead to a dovish accompanying statement.
New Zealand Dollar (NZD)
The New Zealand Dollar has continued to struggle versus the majority of its peers on Monday following an unimpressive result from Chinese manufacturing data.
The Chinese Manufacturing PMI was expected to decrease slightly from the previous figure of 51.7 to 51.3, but the actual result showed a declination to 51.1.
South African Rand (ZAR)
As geopolitical issues between Russia and the Ukraine mount; risk-sensitive currencies like the South African Rand have declined.
With nothing by way of domestic economic data on Monday the South African Rand is likely to continue on the down-trend.