Pound Sterling (GBP)
With little UK data released, yesterday was a quiet day for the Pound. Market volatility has cooled after a difficult week ahead of tomorrow’s significant labour market data. Economists forecast a 6-year low unemployment rate of 6.4%, however the average earnings (minus bonuses) is predicted to have dropped to -0.1% in June. Positive future UK economic performance will be bolstered by the rapidly declining jobless rate, but the lack of correlation between the growth of employment and wage growth makes it increasingly unlikely that Bank of England (BoE) policy makers will hike interest rates before the close of the year. It is important to remember, however, that the average weekly earnings figure is difficult to forecast; a stronger-than-expected figure could potentially boost demand for the Pound.
Euro (EUR)
Anxieties over the current situation in Ukraine have seen demand for the Euro dip, resulting in the Pound ticking mildly higher against the single currency. A spokesperson from NATO said that there was no sign of a retreat in Russia’s military presence, despite an announcement over the weekend that Russia has finished its military exercises near the Ukrainian border. Risk aversion was heightened further when the North Atlantic Treaty Organisation said that there was a ‘high probability’ of further intervention in East Ukraine, causing investors to seek safe-haven currencies.
Having entered into a tit-for-tat sanctions battle, the situation between the West and Russia is likely to deteriorate if Russian aggression doesn’t abate. Ramifications are as yet unknown, but the potential for Russia to cut Europe’s oil supply is increased which would likely have a nasty impact on Eurozone GDP growth.
US Dollar (USD)
The ‘Greenback’ (USD) fell fractionally against the Pound yesterday following trader reaction to a dovish statement from Federal Reserve Vice Chairman Stanley Fischer.The Fed official warned that the ability for large economies, such as the USA, to return to pre-crisis growth levels may have been impaired by the great recession. Cautionary comments, such as describing global recovery as ‘disappointing’, reduced the appeal of the US Dollar slightly because they suggest that the Federal Open Market Committee (FOMC) is less likely to hike interest rates in the near future.
Canadian Dollar (CAD)
A stronger-than-forecast Canadian housing market report boosted demand for the ‘Loonie’ (CAD), which saw the Sterling to Canadian Dollar exchange rate plummet by around -0.7 cents yesterday. The actual data, pertaining to the housing starts indicator for July, blew away the forecast figure of 193,000. Posting a result of 200,100 is a strong sign that third quarter economic growth could be bolstered by house building.
Australian Dollar (AUD)
‘Aussie’ (AUD) trading patterns were driven by the growing list of military conflicts across the globe as Australia released very little domestic data yesterday. The backdrop of geopolitical concerns caused the Australian Dollar to soften against the Pound as traders pulled away from the risk-sensitive currencies.
New Zealand Dollar (NZD)
Despite the lack of influential data, yesterday saw Sterling gain half a cent against the New Zealand Dollar. The uneventful day in terms of economic data releases prompted investors to avert their attention towards burgeoning crises in Gaza, Iraq and Ukraine. The mood in the currency market was decidedly risk aversive and as a result the ‘Kiwi’ (NZD), as a commodity-correlated currency, suffered from the dwindling risk appetite.
South African Rand (ZAR)
Following a quiet day economically the South African Rand showed losses against the Pound as traders flocked to safe haven currencies in response to rising geopolitical tension. Whilst the military conflicts across the globe continue to escalate, demand for the risk-sensitive Rand is likely to remain on its downward trend.
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