Sterling
The sterling slide continued yesterday as data from the British Retail Consortium showed that average retail prices have dropped for the third month in a row. The poor data in combination with a continuation of the decline in support for sterling ahead of today’s MPC statement has caused sterling to drop to a four and a half month low against the euro and a two week low against the US dollar. Whilst we are unlikely to see any change in the rate of quantitative easing or an alteration in interest rates this month, speculation is rife that the new Governor will use the meeting to provide further forward guidance with regards to how long interest rates will be kept at its historic low. Sterling has been sold off in anticipation of this move, as a result, if no such guidance is given, you would expect the trend to snap and sterling to appreciate. Call your trader now to see how the statement is received.
Euro
It was yet another good day for the euro yesterday, logging slight gains against the majority of its most traded peers and its consistent strong performances shown by the euro over the past 10 days meant the euro hit 4-month highs against sterling. Yesterday's euro strength was attributed to data showing unemployment rates across the region throughout June had fallen for the first time in two years. The single currency has taken support over recent sessions, after a string of positive data suggests that the bloc may be transitioning out of the recession it entered back in 2011. Today will no doubt be a very interesting one for the euro. The interest rate decision at 12.45pm will be closely followed by the European Central Bank’s (ECB) press conference where traders will look for clues towards future interest rate decisions, especially in light of the comments made by the President of the ECB last month where he stated that “interest rates will remain at present or lower levels….for as long as necessary." Get in touch for news and live rates.
US dollar
The US dollar reacted to positive data during the day yesterday as the second quarter advance GDP figures came our much better than expected showing growth of 1.7% for the world largest economy – much greater than the 1.1% initially forecast. More positivity came as employment data came in better than expected, leading to analyst predicting that Fridays’ highly influential Non-Farm payrolls data could also be positive. The US dollar experienced high levels of volatility across the board and movements in both directions as traders held their collective breath ahead of the evening's statement from the Federal Open Market Committee. Traders had been speculating the statement might reveal further clarity regarding the so called tapering of the Federal Bank’s bond buying program, however, no such details were given and the committee stated that it was “prepared to increase or decrease” its bond buying program where necessary, whilst stating that deflation could hard harm the US economy. As traders continue to evaluate the more long-term implications of last night's release, the dollar may be affected by further economic data that is coming out today. Weekly data detailing the number of first time unemployment claims made is being released this afternoon as well as Manufacturing Purchasing Managers Index data. Both of these are key economic indicators so call your trader now to see how markets respond as they continue to deliberate on the future course of US economic policy.
Worldwide
Elsewhere, following Tuesday's decline, the Australian dollar weakened further against it's major partners, hitting fresh 3-year lows, due to continued speculation that the Reserve Bank of Australia would cut interest rates next week. Elsewhere, the Canadian dollar first fell following lower than expected monthly growth figures, before rallying to reverse this trend and ultimately gain on all of it's major partners, thanks to encouraging signs of a US recovery. No more data is due from Canada this week, although signs of recovery in the US would in turn benefit the country's currency. Another big mover worldwide was the South African rand, which fell against its 16 most-traded partner currencies, despite the country's trade gap deficit narrowing in May to 7.7 billion rand ($775 million) from 11 billion rand. The rand weakened along with a number of emerging market currencies as the markets become nervous that the Federal Bank could start to taper off its quantitative easing program. Overnight we saw the release of Manufacturing PMI from China and later this evening sees the release of the Producer Price Index from the Australia, which could have an impact on the currency. Call your trader now for the latest prices in world currencies.
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