Pound Sterling
This week saw the Pound begin to make a very slow recovery after it fell to a two-and-a-half year low against the US Dollar last week. This week Sterling has gained by 1.2% making it the second best performing currency after the Australian Dollar.
On Monday Sterling snapped its three-day decline against the ‘Greenback’ after data showed that UK employment and business confidence improved in February. Employment confidence rose to minus 44, up from minus 45 in January.
Tuesday it once again fell after the latest manufacturing data showed a decline of 1.5%, a figure far worse than economists had been predicting. The UK is now set to enter its third recession in four years.
On Thursday the Pound strengthened for a second-day against the US Dollar after the Bank of England said that the UK’s public finances will benefit by £17 billion from transfers from its asset purchasing programme. Against the Euro, Sterling advanced for a third day.
It then advanced for a third-day against the US Dollar after Bank of England Governor Sir Mervyn King reassured the markets that policy makers are not trying to weaken the UK currency. As a result Sterling advanced close to its strongest level in March.
US Dollar
This week the ‘Greenback’ made big gains thanks to a series of strong data releases. US retail sales increased by 0.5% in February and employers added 236,000 jobs, pushing the unemployment level down to a four-year low of 7.7%. The Dollar rose toward a seven-month high as a result.
Midweek it came close to a seven-month high against a basket of currencies due to positive US retail sales data bolstering hopes that the world’s largest economy can cope with the tax hikes and spending cuts that began this year.
Euro
This week saw the Euro gradually weaken against its after the credit ratings agency Fitch downgraded Italy’s sovereign credit rating from A- to BBB+. The Italian economy contracted by -2.7% in 2012, its Unemployment Rate hit an all-time record high of 11.7% in January, it owes around €2 trillion of public debt, and to make matters worse it does not have a stable government to steer it down the path of fiscal consolidation.
The latest German economic data showing signs of stagnation in the Eurozone’s biggest economy. Midweek it weakened further against the Dollar after Bundesbank President Jens Weidmann warned that the Euro crisis is not over.
Weidmann also warned that the German economy is still shaken by the impacts of the Euro zone crisis and that the regions continuing problems pose the biggest threat to the region’s biggest economy. Industrial production across the region fell by 0.4% in January from December. On a year by year basis factory output has fallen by 1.3%.
Australian Dollar
The ‘Aussie’ had a week of gains after it strengthened against the majority of its peers and reached a four-year high against the Japanese Yen as investors pared bets on interest rate cuts by the Reserve Bank of Australia. Economists are expecting the currency to continue to strengthen over the coming months as the nation’s economy begins to adjust to the currency’s strength. So far this month the currency has strengthened by 2.6%, making it the second biggest gainer after the US Dollar.
The ‘Aussie’ was bolstered against the majority of its peers due to a massive surge in employment. The number of new jobs created in February soared by 71,500 taking economists by surprise after they predicted a rise of just 10,000. The unemployment rate in Australia has now fallen to 5.4%. The strong figures have lowered the chance of the Reserve Bank of Australia lowering interest rates to effectively 0%.
New Zealand Dollar
The ‘Kiwi’ weakened against most of its major peers this week due to speculation that New Zealand’s worsening drought will weigh on the economy and supported the case for the country’s Central Bank to maintain interest rates at a record low.
Canadian Dollar
The ‘Loonie’ strengthened against the US Dollar and the majority of its peers after the nation’s new-home price index rose and American jobless claims dropped, adding to signs that Canada’s economic recovery is gaining traction.
South African Rand
The Rand had another testing week this week as it came under pressure against the Dollar as concerns over South Africa’s deficit continued to worry investors. Ongoing labour tensions in the country are also driving risk aversion towards the currency.
Midweek the Rand slumped to a four-year low against the US Dollar and remains vulnerable to further declines as investors continue to be worried over the state of South Africa’s budget and current account deficits. The currency was also weighed down after sales growth slowed to 4.3% in 2012 compared to 5.9% recorded in 2011.
On Friday the Rand recovered from 4-year lows against the US Dollar due to positive production data. The currency remains vulnerable to labour unrest and investors are keeping a close eye out for any signs that illegal worker strikes are spreading in South Africa’s coal mining sector. Production at Anglo American’s Kleinkopje coal mine stopped for a day during an illegal strike on Wednesday. Miners also staged walk-outs at five Exxaro mines earlier in the month.
Comments are closed.