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August 2017

Weekly Currency Insights from Halo Financial

Published: Monday 14 August 2017

What you may have missed…
  • A game of two halves for the New Zealand Dollar
  • Australia’s central bank boosts Aussie Dollar, but not for long…
  • Euro remains strong
  • More positive UK economic data fails to lift the Pound
  • Positive outlook for Japanese economy – what next for Japanese monetary policy?
Much of the exciting economic activity took place overnight from Asia Pacific. Data releases from Australasia that affected markets included notable economic information from New Zealand, where Retail Sales data came out better than expected; Chinese Retail Sales and Industrial Production, which, in contrast, were disappointing; a key speech from the Reserve Bank of Australia; and positive growth figures for Japan.

A game of two halves for the New Zealand Dollar

The New Zealand Dollar strengthened but then felt the pressure from weaker than expected results from its key trade ally, China.

Earlier in the week, The Reserve Bank of New Zealand kept interest rates at 1.75 and raised their concerns about falling inflation in the coming months. A strong New Zealand Dollar would contribute to that and is not the best position when their major trading partner, China, is showing signs of economic strain. However, the level interest rate will continue to support a strong currency.

Australia’s central banks boosts Aussie Dollar, but not for long…

The speech from the assistant governor of the Reserve Bank of Australia (RBA) helped boost the Australian Dollar, but it too felt the weight of the poorer than expected Chinese economic data, dropping again on the news. China is Australia’s number one export market, so the impact is entirely understandable. There will be more key data for Australia later this week, so watch this space…

Euro remains strong

Monthly Eurozone Industrial Production data released today was disappointing, falling 0.6 percent – a little worse that the 0.5 percent drop that had been forecast, but representing annual growth of 2.6 percent. Across the EU as a whole, there was a monthly fall of 0.5 percent, resulting in a 2.8 percent increase compared to the same time in 2016. The strength of the Euro in recent weeks has no doubt had an effect on incoming orders from overseas.

More positive UK economic data fails to lift the Pound

In the UK, we received welcome news of better Industrial Production results, thanks in no small part to a weak Pound as an incentive for increased new orders from overseas. It was still not enough to boost Sterling, which rose slightly on the initial news and then bobbed back to what seem to be the “business as usual” levels against the Pound’s major currency partners – 1.10 against the Euro and 1.30 with the US Dollar – on the announcement of the latest UK Gross Domestic Product (GDP) estimate, which the latest research from the National Institute of Economic and Social Research (NIESR) suggested that the economy in the UK is, for want of a better phrase, losing steam.

Positive outlook for Japanese economy – what next for Japanese monetary policy?

Positive quarterly growth data for Japan was considerably higher than expected and demonstrated growth for the sixth quarter in a row; the best results for Japan in over two years. This is down in part to increased consumer spending, which has been considered the weakest link in Japanese economic data for some years. Markets are monitoring ongoing results carefully to see if Japan has been able to buck its usual trend. They are also now on the lookout for any economic stimulus or inflation announcements, as nothing has yet been announced – or even suggested. The Japanese Yen continues to weaken against the US Dollar and is still considered under pressure, although the Yen’s often-considered status as a “safe haven” currency may make it more appealing in light of the strain of ongoing political and economic across the globe. Time will tell…
 
 
What to look out for this week…

A bumpy ride ahead for the USA?

Later this week, we will get a bumper bag of data for the US, including Manufacturing, Retail and Industrial Production results – in addition to planned activity from the Federal Reserve. Initial political tensions strengthened the USD, considered the ultimate safe haven currency, and recent US economic data has been encouraging, so this could all add up to change the fortunes of the US Dollar. There has also been much talk of traders anticipating a weakening US Dollar, so it’s certainly one to watch and to plan ahead carefully for any currency exchange in the coming days and weeks.

Could the Australian Dollar get another boost?

Tonight marks the publication of the meeting minutes for the RBA and there will be employment figures released later this week, which forecasts say will be positive, so there could be improvement for the Australian Dollar once again. Business confidence in Australia remains high, so it is likely that this currency will continue its recent trend of strength.

Will EU growth data strengthen the Euro?

After disappointing industrial data from the Eurozone and EU, we await economic growth data for the Eurozone in the coming days, so traders will be watching to see if the Euro responds.

Will there be more interest in the Japanese Yen?

Ongoing worries about the US-North Korean tensions could cause additional flight to the relative safe haven of the Japanese Yen.