Pound Sterling
This week saw the Pound recover some the losses it has suffered since the New Year. The currency benefitted from investors seeking safe havens from the fallout of the European finance ministers’ decision to levy tax on Cypriot bank deposits as part of a rescue plan for the small country.
The Pound strengthened to a five-week high against the Euro and looks set to rise to a six-week high over the next few days. The rise comes after Cyprus Finance Minister revealed that the small nation had failed to gain support from Russia. The European Central Bank has given Cyprus until Monday to find the money it needs.
Against the US Dollar, Sterling rose to a three-week high after the latest retail sales data dampened speculation that the Bank of England will add to its monetary stimulus plans.
Next Wednesday sees the release of the UK’s latest GDP data which will hint at whether the country will enter a triple-dip recession or not.
US Dollar
This week the ‘Greenback’ soared against the Euro as investors flocked to the safety of the Dollar over fears that the bailout plan proposed for Cyprus will involve taxes being imposed on depositors. The move proposed by European finance ministers created fears that such a move could be imposed upon other struggling nations such as Spain.
Midweek the Dollar strengthened to a four-month high against the Euro after the Cypriot government overwhelmingly rejected the EU proposed bank levy. The currency also made gains against a number of other peers due to the release of further positive economic data. The number of building permits issued in February rose by 4.6%, above the 2.3% increase predicted by economists.
On Friday the ‘currency weakened against the Pound and fell slightly against the Euro due to the positive retail sales data from the UK and the firm stance taken by the ECB to impose a deadline upon Cyprus.
Next Tuesday see the release of the latest Durable goods and consumer confidence data which is expected to show signs of improvement.
Euro
I was a week of low for the Euro as it fell by more than 1% against the US Dollar to a three-month low as an agreement on a bailout deal for Cyprus triggered fears over disruption to financial markets in the Euro zone.
Midweek the Euro fell to a four-month low against the US Dollar after the Cypriot parliament voted to reject the bank-deposit levy needed to secure a bailout, risking renewed turmoil in the currency bloc.
It weakened further against the Dollar and a number of its peers after the latest data out of France showed that business activity in the country shrunk at its fastest pace in four years, defying economist expectations for signs of an improvement. In more bad news for the Euro zone the latest German PMI data showed that the region’s largest economy saw declines in its manufacturing and service sectors in February.The European Central Bank has given Cyprus until Monday to agree to a bailout package or lose its emergency funding. If no deal is agreed we can expect the currency to fall further as risk aversion rises.
Australian Dollar
The ‘Aussie’ had a week of gains despite political unrest affecting the Oceanic nation’s government. On Monday it was close to a five-week high after Central Bank Deputy Governor Philip Lowe defended a higher exchange rate and savings level, saying that they had helped stabilize the country’s economy.
Midweek the ‘Aussie’ weakened slightly against its peers due to a dispute in the country’s ruling political party. Labour Party veteran Simon Crean dramatically called for a vote of confidence against Prime Minister Julia Gillard. The currency could remain volatile as the markets expect ongoing political uncertainty over Gillard’s leadership.
The ‘Aussie’ strengthened against a basket of currencies due to investors turning to the currency for a safe haven option as the fallout from the Cyprus debacle continues.
New Zealand Dollar
The ‘Kiwi’ was affected by the risk aversion hitting the markets this week. It weakened against a basket of currencies after the New Zealand finance minister Bill English said that the currency was overvalued and that there is little the government can do to lower it.
Midweek, the ‘Kiwi’ weakened against the US Dollar but made gains against the Euro due to the fallout of the Cypriot governments decision to reject a bank levy.
On Friday the currency then strengthened to a three-week high after the government released data that showed the nation’s economy grew by 1.5% in the final quarter of 2012, nearly double what the Reserve Bank had predicted. The pace of growth is the fastest in three-years.
Canadian Dollar
On Monday the ‘Loonie’ fell to its lowest-level in a week against its US relation as risk appetite was damaged by news out of the Eurozone. The currency was also weighed down by the falling price of commodities such as crude oil.
The currency then weakened for a second day against its US peer after Canadian factory sales fell in January. The currency was also not helped by the increase in risk aversion caused by the Cyprus situation.
End of the week it strengthened to a weekly high against its US relation after Canadian Finance Minister Jim Flaherty said that he plans to eliminate the country’s deficit before the next election due to be held in 2015. The country’s retail sales gained in January adding to the appeal of the currency.
Canada’s latest GDP data is due for release next Thursday.
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