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August 2017

Weekly Currency Insights from Halo Financial

Published: Friday 04 August 2017

What you may have missed this week…
  • Sterling in the spotlight as it slips back down 
  • US Dollar gets a helping hand from strong jobs figures
  • Most Canadians in employment since pre-crisis
  • Euro continues upward turn
By Rachael Kinsella
 
Sterling in the spotlight as it slips back down
 
As expected, it’s been a rollercoaster ride for the Pound this week! In the run up to “Super Thursday”” – so called for the significant volumes of key UK economic data and announcements packed into one Thursday afternoon – Sterling was enjoying a moment in the sunshine as the second strongest currency after the Euro. All eyes were firmly trained on the outcomes the Bank of England (BoE) meeting and report findings. Another “ Super Thursday” full of key economic data for the UK and the Pound: the much-anticipated interest rate announcement, Monetary Policy Committee (MPC) meeting minutes, plus the Quarterly Inflation Report, followed by the press conference from the BoE Governor, Mark Carney. Interest rates were kept the same, at 0.25 percent, with a large majority vote.
 
The defining moment for Sterling yesterday was the BoE’s decision to lower the growth forecast for the UK to 1.7 percent from 1.9 percent, also lowering their predicted 2018 growth figure slightly from 1.7 percent to 1.6 percent. This caused a nosedive for the Pound against its major currency pairings, the already strong Euro, and the uncertain US Dollar. Some market experts believe that this will balance itself in the coming months, as European political developments unfold and the US political saga continues… Read more here. 
 
The UK has also received mixed signals in terms of economic data this week, with positive Manufacturing and Service Sector Purchasing Managers’ Indices (PMI), both showing growth for their respective sectors and an improvement on the previous month’s disappointing results, but, in contrast, a slowing in growth for the construction sector, at its lowest levels for almost a year.
 
US Dollar gets a helping hand from strong jobs figures
 
The US has also experienced its ups and downs this week. The latest US Employment report beat expectations and showed that the US economy added 209,000 new jobs for July 2017, bringing the unemployment rate down and spelling good news for US workers and the US labour market. The US Non-Farm Payroll data also came out better than expected, providing a healthy 220,000 addition to the US workforce. This in turn has helped the US Dollar to recover some of its weakness from recent lows.
 
Most Canadians in employment since pre-crisis
 
North American neighbours, Canada, also reported impressive employment figures for July, with the Canadian unemployment rate falling to the lowest level since before the credit crunch. However, the Canadian economy is feeling the pressure from elsewhere, with disappointing trade figures and the shock interest rate increase last month, leading markets to expect another interest rate increase before 2017 is over. The Canadian Dollar fell against its US currency partner as the latest US employment figures were announced, although the Canadian currency is still performing higher throughout 2017 to date.
 
Euro continues upward turn
 
The Euro continues its strong performance against its major currency pairings, the Pound and US Dollar, although markets are watching and waiting with anticipation for the September European Central Bank meeting and how this is likely to affect Euro strength. The upcoming European elections could also have an effect on the Euro and overall economic sentiment, with the potential to bring the Euro down again. Markets currently expect the European currency to continue to gather pace.

Australian interest rates held
 
The Reserve Bank of Australia (RBA) left rates on hold at 1.5%, raising concerns about Aussie Dollar strength and its effects on exporters and predicting moderate economic growth.
 
NZ Dollar drops despite improvement in employment
 
Earlier this week, the NZ Dollar fell against all its key currency partners as the latest jobs figures failed to impress, meaning any New Zealand interest rate increase is highly unlikely for the coming year.
 
Read more about this week’s currency ups and downs here.