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October 2015

Daily Currency Insight

Published: Thursday 22 October 2015


The Bank of Canada kept their overnight lending rate (the base rate) at 0.5% when they met yesterday. They did though cutting their growth forecast for the year ahead and warned of the dangers of falling oil and commodity prices. Clearly, the collapse of commodity markets is an external factor but the new Prime Minister will have a fight on his hands to restore growth with such heavy external factors weighing on the commodity-reliant Canadian economy.  The Canadian Dollar has lost 1% against most other currencies in the past 24 hours and, if today's retail sales data is as poor as many analysts are expecting, there is no reason for that to change it's course. 
 
The South African Rand slumped in value yesterday after the SA Finance Minister slashed their 2015 growth forecast to just 1.5 percent from the previous 2 percent expectation. During his budget speech Nhlanhla Nene warned of tough times ahead and that is no surprise when commodities which make up such a large proportion of South Africa's international trade are in the doldrums. The Sterling – Rand rate has lost nearly 5 percent this week and is threatening to test the R21.00 level. 
 
I covered the release of improved UK government borrowing data in yesterday's report but the Pound certainly benefitted from the news. Today's Sterling challenge is the retail sales data; due at 08:30 GMT. With the Rugby World cup and better weather, there is every reason to suspect the data will reflect an upturn in high street activity in September and that would encourage the already buoyant Pound.
 
The other big news story of the day revolves around the European Central Bank. The release their economic bulleting this morning and then meet to determine interest rates and Quantitative easing volumes later this morning. No one is expecting any change in the base rate but there is certainly scope for talk of –or even action on – expanding the money supply through bond buying schemes. The Euro is weakened by the rumours and would be further weakened if the facts follow the speculation. Beware if you are a Euro seller. However, the Sterling – Euro exchange rate is banging its head against the €1.3650 level from below without success. If it fails to move higher, there is scope for a fall to €1.3350 again but a break above €1.37 opens the door to higher levels.
 
Have a great Thursday and just remember that everything in back to the future is now back in the past. The date they set for the future in the film was 21/10/2015 and that was the time strewn with hover boards, self-tying basketball boots and all manner of other futuristic stuff. I assume everyone has some of those, so it's good to see it all happened. 
 
Alternative Definitions
  • Absentee: A missing golfing accessory.
  • Alarms: What an octopus is.
  • Clock: A small mechanical device to wake up people without children.
  • Flabbergasted: Appalled over how much weight you have gained.
  • Insurance: Agreement to ensure the financial survival of the insurer.
  • Ow: The first word spoken by children with older siblings.
  • Self-control: The ability to eat only one chocolate from the box.
  • War: A cowardly escape from the problems of peace. Thomas Mann