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December 2015

Daily Currency Insight

Published: Tuesday 15 December 2015

  • Sterling slips on BOE comments
  • USD poised ahead of Fed decision
  • Aussie Dollar stronger after RBA minutes

 
 
Monday was a quiet one on the data front. However, Sterling slipped against most other currencies after one of the voting members of the Bank of England, Minouche Shafik made it clear that she would need to see clear evidence of a need to hike rates before she could support such a move. It is a statement of the blindingly obvious but just hearing it from a Monetary Policy Committee member is enough to send shivers down traders' spines and the Pound suffered as a result. UK inflation data is due this morning but there really isn't any inflation to speak of. It would take a big surprise for the Pound to make any gains.
 
The Reserve Bank of Australia released minutes from their last interest rate setting meeting overnight. Whilst they didn't cut their base rate at that meeting, the minutes would suggest there is a tendency towards doing so at some stage. There is no real surprise in their concerns; a slowing Chinese economy, depressed commodity income, inflation being dampened by oil prices etc etc. The Australian Dollar, which had weakened to A$2.12 against the Pound yesterday, is back down to A$2.08 this morning. It would seem traders are less convinced of the rate cut argument than they once were.
 
We will get the Eurozone unemployment rate this morning but that is the Q3 data, so it's a lagging indicator and unlikely to change the fate of the Euro.  The euro has had a better start to the week though. It has strengthened across the board as minor improvements in Eurozone data have allowed traders to start to think the worst may be over for the European area. It is probably too soon for optimism but less pessimism is a good start.
 
The big looming news is the US interest rate decision which we will get tomorrow. Many - or perhaps most – economists believe there will be an interest rate hike tomorrow and the US Dollar seems poised to benefit from that but this isn't a foregone conclusion and, whilst those in the markets seem to think a 25 basis point rate hike is inevitable, the ECB moved in a smaller increment than that when they increase the cost of deposits and there is nothing to say the Fed has to make 0.25% adjustments. They may start with a smaller step than that or postpone the change for now. Volatility is inevitable though and, if ever there were a time to place an automated order to manage risk or target advantageous exchange rates, today is the day.
 
And we can't let this moment pass without comment. Tim Peake is set to take off for the International Space Station and become the first official UK astronaut. It's every kids dream to travel to space and he is getting to live out that fantasy. Awesome work Major Tim.
 

 The test

 

Eight new starters with a company had completed their first three months and had to pass a test to be taken on as permanent staff.  The company brought in an independent examiner for the day and he handed out the papers before patiently invigilating for 2 hours.
 
When he collected the papers, one of the candidates, a brash American guy, had attached two £50 notes to the paper with a little post it note that said '£1 per percentage point. You do the math.'
 
The next day each of the candidates got an envelope with their results. The American guy opened his envelope and it contained £61 in cash with a note that said 'Here's your change. You do the maths'.