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October 2015

Daily Currency Insight

Published: Wednesday 21 October 2015



Yesterday's market news was limited but US housing starts were substantially higher than the market expectations. The US Dollar was largely unmoved by that news. The Sterling – US Dollar rate is caught in a very narrow band right now as traders try to decide whether the Federal Reserve has any plans for a 2015 rate hike. I suspect not and, if I am right, the US Dollar will weaken over the coming weeks. That weakness may also be hastened by7 the tactics OPEC is using to destroy competition through the maintenance of very low oil prices. We all know this isn't going to last for ever but the short term impact on US production is very significant.
 
We heard overnight that the World Bank has cut its forecasts for commodity prices through the next year. That whipped the rug from beneath the Aussie, Kiwi & Canadian dollars as well as other commodity related currencies. All are a tad weaker this morning. There had been concerns that the most substantial El Nino event in decades would cause foodstuffs to rally on short supply but the World Bank considers supplies to be sufficient to avoid that impact.
 
The Aussie Dollar was also hit by a less than encouraging reading on their leading index indicator of future growth and the New Zealand Dollar was knocked by a drop in consumer credit card spending.
 
Today's big data comes from the UK and Canada. In reverse order, the Bank of Canada is expected to leave the Canadian base rate on hold when they meet today. As mentioned above, very low commodity prices and weakening energy supply are harming the Canadian economy but the BOC is not showing signs of panicking at the moment.
 
In the UK, public sector borrowing is the big news; well that and a speech from the Bank of England Governor which might include comments on a potential UK exit from Europe. The borrowing data has just hit the newswires and there was a very significant fall in Government borrowing in September. The fall of £9.4 billion compared to September 2014 was encouraging and the occupier of 11 Downing Street should be pretty happy this morning. Sterling, which had dipped ahead of the data, bounced on the news and is in good shape for a positive day.
 
On the periphery of Europe, the largest of the Eastern European economies, Poland is on the brink of electing a strongly anti-EU government. This of course might have no impact at all but with Britain gearing up for an 'in-out' vote on Europe, further euro-scepticism might offer support for the outies. Poland is, as we stand, destined to join the Eurozone at some point in the future. If this government is elected, that is about as likely as Amazon deciding to pay all its tax in the UK.  Highly unlikely in other words and definitely a story to keep an eye on. 
 
And in the 'instant karma' category of news comes the story of a bull fight in Peru which went a tad wrong. As one bull entered the ring, spectators were seen to throw beer and other objects at the animal. It is hard not to think 'serves you right' when you read on to see that the bull responded to the taunting and abuse by leaping into the crowd and running riot injuring 4 spectators. Reaping and sowing epithets spring to mind.
 
Dinner with the boss
 
I was having dinner with my boss and his wife, and she asked me, "How many potatoes would you like?"
"Oh", I said, holding out my plate, "I'll just have one, please."
"It's OK", she smiled, "no need to be polite."
"In that case", I said, "give me six... ugly".