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October 2017

Weekly Currency Insights from Halo Financial

Published: Friday 06 October 2017

What you may have missed…
  • Troubled times for Sterling
  • Euro performing well 
  • Boost for USD – will it last?
  • Canadian data confounds markets
By Rachael Kinsella
 

Troubled times for Sterling

The Pound has had a troubled time of late. Doubts about the health of the UK economy – despite some good economic data results this week – speculation about interest rate hikes and how the UK’s economy could weather rate increases; continued debate about Mrs May’s position as UK Prime Minister and who, if anyone, might replace her; then our old friend, Brexit, continuing to add to the uncertainty mix.

Euro performing well

The Euro, in contrast, is performing well, with another boost in the shape of improved German Factory Orders data. The increase in new orders of 3.6% denotes one of the most encouraging results seen so far this year, and, as a key European economy, this bodes well for the wider Eurozone’s economic strength. These positive German economic results follow equally encouraging German manufacturing figures earlier in the week, showing the fastest rate of growth for over six years, boosting overall economic sentiment for the Eurozone.
 
 
Boost for USD – will it last?
 
The US Dollar has also been enjoying a boost this past week, following some firm insights on Trump’s tax policies and some positive economic data in the form of capital goods. However, the US Dollar is still finding itself limited against safe haven currencies such as the Swiss Franc and Japanese Yen in times of geopolitical uncertainty, and caught up in the commodity currency conundrum against the Australian Dollar.
 
Canadian data confounds markets
 
The Canadian Dollar has had a good run recently, but analysts are wary of what results the key data being released later today will bring. As we have seen several times in recent months, there could be volatility for the Canadian Dollar from this market uncertainty – and this can often mean a sizeable swing in either direction for the CAD.
Which brings us nicely on to what to look out for in the week ahead…
 
What to look out for this week…
 
What next for the pressured Pound?

Sterling is struggling under the weight of all these pressures and events elsewhere that are strengthening its major currency pairings, in particular, the US Dollar and Euro. Round and round we go, where it stops, nobody knows…
Anyone looking to buy Sterling right now has a window of opportunity as the Pound remains vulnerable against its key currency partners over the weekend.

Volatility likely for Euro next week
 
Europe has a number of big issues to deal with, which could have an adverse effect on the Euro. The Catalan independence question is a big one and tensions are high. We may see volatility for the Euro against its main currency counterparts as European markets open on Monday morning, so buyers and sellers of the Euro could have an opportunity here to benefit from currency volatility by using market orders – and be prepared to protect yourselves against potential currency fluctuations. Speak to a currency specialist to find out how it could affect you.
 

Jobs growth for US?

There are positive forecasts for the latest US employment data. However, it remains to be seen whether the recent hurricanes have affected jobs in areas of the US and whether this will be reflected in this month’s figures or the next.

Movement on the cards for Canadian Dollar?

Canadian employment data due to be released this afternoon UK time has confounded analysts, who are conflicted on the forecasts. This could mean volatility for the Canadian Dollar when the data is released around lunchtime (12.30pm GMT). This provides an opportunity with for those buying or selling Canadian Dollars – be prepared and consider taking advantage/preparing yourself for any movement.
 
China could open up commodity currency opportunities…
 
The Chinese Golden Week holiday is drawing to a close, with the key Communist Party Congress coming up on 18th October. Until this time, there will not be much going on in Chinese markets, which means that countries tied to the Chinese economy could see their currencies affected negatively. Take note, buyers and sellers of the Canadian, Australian and New Zealand Dollars.
 

Australian Dollar has highs and lows

The Australian Dollar was boosted earlier in the week by new home sales results, but the Reserve Bank of Australia (RBA) kept interest rates unchanged. Lower than expected retail sales data (the biggest drop recorded for over four years) weakened the AUD; then comments from the central bank about those disappointing retail sales, saying that this does not in itself mean that rates should be lowered – but the bank is keeping a close eye on developments – unnerved the Australian Dollar.
 
NZ Dollar feels the election pressure

Post-election uncertainty is likely to put pressure on the New Zealand Dollar for a while yet. We have seen from previous elections, a decline in the strength of the currency in the run up to the election, some volatility afterwards, and then improvement as the dust settles. The New Zealand Dollar is likely to follow this rough pattern.

Markets are nervous at the prospect of central bank changes spurred on by a new government. What will the Reserve Bank of New Zealand (RBNZ) do regarding their monetary policy? After several drops in interest rates, will they change their approach and start to wind down this stimulus? This could certainly be on the cards, given the country’s strong labour market and rising inflation. But political change also has the power to affect the economy, and in turn, the NZ Dollar.

#FridayPhilosophy

“[The sage] is ready to use all situations and doesn't waste anything. This is called embodying the light." — Lao Tzu, China, c. 600 B.C.

“Wise men speak because they have something to say; fools because they have to say something.” – Plato, Ancient Greece, c. 400 B.C.

"The life of money-making is one undertaken under compulsion, and wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else." – Aristotle, Ancient Greece, c. 300 B.C.