Central bankers aplenty today

Sterling took a tumble yesterday. The ongoing effect of covid and fuel shortages is having an impact but the greater impact appears to be the effect of investors shuffling their portfolios as various countries emerge from COVID at different paces and in different ways. News wires are full of discussion on the likely timing and magnitude of central bank monetary tightening. Hence investors busily shuffling funds around the globe, seeking to pre-empt the next step in monetary policy.

GBPEUR breaks out of year-long trend

Ergo, the GBPUSD exchange rate dropped 2 cents to $1.3520 before finding a little support. That pair is back up to $1.3550 as I write. The GBPEUR rate fell a similar headline-grabbing 1.5 cents to €1.1570 but is pushing back up to €1.16 this morning; probably driven by profit-taking. The drop is a concern for EUR buyers because it has broken an upward trend that has been in place since the start of the year. Without wishing to bore you, I will mention that the 38.2% Fibonacci retracement level should take this rate to €1.1460, which would match the low we saw in April. Euro sellers at least have a target level.

That speculation on central bank policy will continue unabated today with a profusion of central bank speakers from Europe, Britain the US as well as from the Bank of Japan & Bank of Canada. from a US perspective, the messages are mixed as various Federal Reserve chairmen & women espouse their views. the consensus seems to be that a reduction in bond buying will commence before the end of this year but interest rate rises won’t begin until the latter part of 2022. Nonetheless, investors are often thinking that far ahead. so the US dollar will react accordingly.

As well as the musings of central bankers, there was some hard data today. US crude oil inventories have been influential of late and a drawdown in the stockpile of 1.6 million barrels or more is expected. That kind of reduction is likely to strengthen the value of oil that would generally we can the US dollar. We will also see pending home sales from America. That’s a monthly figure and 1.4% growth is expected. That won’t wipe out the 1.8% contraction in July but it would still be a positive sign of recovery.

Sterling’s poor showing yesterday wasn’t confined to the euro and U.S. dollar exchange rates. The GBPNZD exchange rate peaked at NZD 1.9620 before dropping nearly two cents on the day. We have seen a bounce this morning after some negative Chinese news hit the Asian markets. This pair is back up too just below NZD 1.95. Trendline support comes in on the charts at NZD 1.8430, so watch out for that.

China’s coal shortages impact Australasian Dollars

That news from China took the form of a shortage of coal which is causing power outages and production shutdowns, especially in Northeast China; a major industrial area. Calls for increased coal imports ought to boost the value of the currencies of the coal exporters which service China’s demand. Australia is one such exporter and the Australian Dollar has made significant gains in the last two days. Having peaked at AUD 1.8885 on Monday, the GBPAUD rate is down to AUD 1.8675 this morning and is still falling. Technically speaking, there isn’t a lot of support for the Pound until this pair falls another cent. So, AUD buyers beware.

As mentioned on Monday, these next two days mark the end of the month and the quarter, so will be volatile; unexpectedly so, probably. Tin hats on, everyone.

And finally, on this day in 1940, Captain Hugh Mulzac became the first black Commander of a US merchant ship when the Booker T. Washington was launched in Wilmington, Delaware.

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