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October 2015

Daily Currency Insight

Published: Tuesday 20 October 2015


The Reserve Bank of Australia was a tad more upbeat in the tone of its meeting minutes, which were published overnight. They believe growth in Q3 was boosted by their low interest rates and by the weakened Australian Dollar. They are even suggesting the unemployment rate could fall in the coming months. They were clearly not contemplating any imminent interest rate cuts. Their comments were not enough to change the value of the Australian Dollar which, along with other commodity related currencies may well be benefitting from the flattening out of commodity prices across all sectors.  If commodities have bottomed out, we could see some strength return to the likes of the Aussie, Kiwi and Canadian Dollars and perhaps the South African Rand and Norwegian Krone as well.
 
In spite of years of quantitative easing, European inflation is still non-existent. In fact last month saw the Eurozone inflation drop into negative territory and growth is still invisible whilst unemployment remains gruesome. Hence, most analysts believe we will see a move towards further QE when the European Central Bank meets on Thursday. So it is no surprise that the Euro is weak at the time of writing, Against the Pound, the euro has fallen back to €1.37, the first Fibonacci retracement target.  A break above there would open the doors to another cent upward. Anything above €1.38 would open the door to a €1.3875 rally. We will watch events over the next three days with real interest because it could illuminate the path for the GBP-EUR rate for the months ahead.
 
The reason traders are looking further ahead than just today's data diary is that there isn't a lot to see over the next 12 hours or so. We will get US housing starts and a minor pick up is expected there and we will get two speeches from Federal Reserve members including Chair Janet Yellen. Who knows what might come from that but of course we are all hoping for some hint of US interest rate direction and timing. The Sterling – US Dollar exchange rate appears to be edging towards $1.56 as traders try to second guess a delayed interest rate hike.
 
And I know Halloween is 10 days away yet but I am starting to think it has all gone a bit too far. It used to be a bit of apple bobbing and the odd pumpkin but the arrival of trick or treating (demands of goods with menaces as it is known legally) has prompted a whole new level of scary stuff. It has got to the point where some Halloween outfits should really come with movie style certificates. Now be honest with yourselves, it isn't for the kids any more is it.
 
Wedding Video
 
A guys friends are putting on a party for him to mark the finalisation of what has been a very messy divorce after his wife cheated on him. One of his friends asks him for a copy of the wedding video to play at the party.
"What do you want that for?" asks the incredulous divorcee. "I don't want to see that again. It's a memory I want to erase."
"Trust me, says the friend." I'm going to play it backward in slow-motion. You'll love the part where she gives you back the ring, covers her face, reverses down the aisle and clears off."