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November 2015

Daily Currency Insight

Published: Thursday 05 November 2015



So in 1605, Guy Fawkes and his buddies tried to blow up Parliament and the king in the infamous gunpowder plot. We celebrate by burning him in effigy to this day but in Lewes (near my home) they burn more modern day villains including Alex Salmond, Vladimir Putin and others. I wonder who will be in the firing line tonight. 
 
The first news of the day of any consequence was the fall in German factory orders. I would think it’s a fair bet that factory and industrial output is going to fall in the wake of the VW revelations, so the pressure is on the Eurozone authorities to try to restore some level of confidence in the 'recovery'. That's not happening at the moment and the euro is on a general retreat.  This morning also brings the Eurozone retail sales data and forecasts are mixed on this. The €1.42 level is a significant one for the Sterling – Euro rate but it looks set to be breached at some point.
 
And speaking of the Pound, it's a big day for the Bank of England. It looks like they are trying to get a month's worth of work out of the way in a day. We'll get the decisions on interest rates and their quantitative easing budget. No change is expected on either by the way but we'll also get the minutes of that meeting which will be scrutinised for hints of the timing of the next interest rate hike. Ditto the inflation report which is published at the same time. Sterling, as you may have seen, is riding high on improving economic data and rising confidence. If the advent of a UK interest rate hike is pushed back by these reports, the Pound will shed some of its strength in the post lunchtime trading session (UK time). 
 
The Sterling – South African Rand reached a fresh all time high again overnight. The Rand is being battered by the depressed state of commodity market prices; diminishing income from all those mined raw materials. The Pound, on the other hand is ....well read the previous paragraph again and you'll see. Only a recovery in the demand for and the prices of commodities will boost the Rand at this stage; South Africa is already sporting one of the highest interest rates in the developed world.
 
The Euro – US Dollar rate is still falling as the Eurozone suffers and the Chair of the Federal Reserve said the chance of a December rate hike is still 'live' as she put it. Another Fed member also said that inflation is higher than we think which, if you believe his rhetoric, would mean their measure of inflation is not a true representation of the facts. Having breached the $1.0870 level, the next technical target is $1.0730 and I can see that happening in a matter of days unless the general trends change.
 
The Australian Dollar remains weak after the Governor of the RBA suggested the next likely move the bank would make is downward on interest rates. That isn't a surprise; it would be hard to find an analyst who expected a rate hike but it does carry more weight when the head man says so. 
 
 

At then garage

 
Two car mechanics were having a tea break when one pulled out a bottle of brake fluid and started drinking it. The other one said, "What the hell are you doing? You can't drink that stuff."
"Leave me alone," says the drinker. "It tastes great and I just love it."
"But brake fluid is poisonous!" says the friend.
At that point the drinker stands up and shouts, "I said leave me alone. It's fine. I'm in control of it. I can stop any time I want."