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Weekly Currency Roundup - A Week of Two Halves for the Pound

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Pound Sterling While the Pound began the week trading in the region of multi-month highs against both the US Dollar and Euro, the British asset broadly softened on Thursday as an unexpected decline in UK retail sales dented investor confidence in the nation’s economic recovery.


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The drop in sales was the worst result for ten months and reminded investors that the UK’s economic recovery remains fragile. Sterling had previously rallied against the ‘Greenback’ as the Federal Reserve’s surprise decision threw the currency market into a tailspin. However, by Friday the Pound had largely recovered losses against the US Dollar as a report showed that the UK’s trade deficit narrowed in August. The British currency was still slightly softer against the Euro.

The Pound began the week trading in the region of 1.1927 against the Euro and ends the week trading in the region of 1.1857

US Dollar

The ‘Greenback’ started the week on the back-foot, and continued to slip over the next few days. The safe-haven asset was weakened by news that the hawkish candidate for the post of Chairman of the Federal Reserve had removed himself from consideration for the position, and declined further after the FOMC shocked industry experts by refraining from tapering stimulus at the conclusion of its two-day policy meeting. As economists expected easing to be trimmed by 5-10 billion Dollars, the unexpectedly dovish action from the central bank had significant repercussions and the ‘Greenback’ tumbled against its emerging-market and commodity-driven rivals. Despite Thursday’s data (including initial jobless claims and existing home sales) surprising to the upside, the US Dollar closed the European session weaker than it began and was in line to post 5-day declines against several of its major currency rivals.

The US Dollar began the week trading in the region of 0.7542 against the Euro and ends the week trading in the region of 0.7395

The Euro

In a relatively quiet news week for the Eurozone, much of the Euro’s movement has been driven by global developments. That being said, early in the week the common currency began to recoup recent declines against the Pound as gauges of economic sentiment for Germany and the Eurozone surged by more than anticipated. Gains were consolidated on Thursday in the aftermath of the publication of the UK’s lacklustre retail sales figures, and the Euro edged away from the seven-month low recorded at the outset of the week. The common currency also put in a good performance against a broadly softening US Dollar and achieved a 3 ½ year high against the Yen. If today’s consumer confidence gauge for the Eurozone, due out at 15:00 GMT surprises to the upside the Euro could end approach the weekend on a bit of a high.

The Euro began the week trading in the region of 1.3344 against the US Dollar and ends the week trading in the region of 1.3524

Australian Dollar

As trade began this week, the ‘Aussie’ broadly strengthened in response to Former Treasury Secretary Lawrence Summers bowing out of the race to be the next Chairman of the Federal Reserve. However, after minutes from the Reserve Bank of Australia’s latest policy meeting showed that the central bank is pushing for a weaker domestic currency the South Pacific currency shed its advance. Declines were extended mid-week in spite of stronger-than-anticipated leading economic indexes for Australia. But by Friday the ‘Aussie’ had staged an impressive comeback as news from the US boosted commodity-driven assets, and although the currency dipped against the ‘Kiwi’ it recorded a five-day gain of 2.2 per cent against the ‘Greenback’.

The Australian Dollar began the week trading against the US Dollar in the region of 0.9366 and closes the week trading in the region of 0.9433

New Zealand Dollar

Following on from last week’s hawkish statement from the Reserve Bank of New Zealand regarding the likelihood of the central bank increasing interest rates next year, the ‘Kiwi’ ended Monday’s local session at its highest level against the Pound for almost a month. The New Zealand Dollar was also trading close to a four-month high against its US rival as unexpected Federal Reserve developments dimmed the ‘Greenback’s appeal. Although by mid-week comments from New Zealand’s Finance Minister (regarding the domestic economic benefits of a weak local currency) put some pressure back on the commodity-driven asset, declines were brief. The shock Fed easing decision, coupled with encouraging domestic growth figures, strengthened the ‘Kiwi’ against the majority of its most traded rivals before the close of the week.

The New Zealand Dollar began the week trading against the US Dollar in the region of 0.8210 and ended the week trading in the region of 0.8378

Canadian Dollar

After being trapped in a fairly bearish relationship with its peers for much of last week the tide turned for the ‘Loonie’ on Monday, as the news of Lawrence Summers resignation from consideration for the post of Fed Chairman boosted the currency. Better-than-forecast domestic factory orders, existing home sales and wholesale sales reports gave the Canadian Dollar a further leg up as the week progressed, helping the ‘Loonie’ achieve a three-month high against the ‘Greenback’. That being said, bets that the rally in higher-risk assets may have been excessive saw the Canadian Dollar weaken slightly ahead of the publication of domestic inflation figures, scheduled for release at 13:30 GMT. Economists have forecast that the nation’s consumer price index advanced by 1.1 per cent in August, year-on-year, down from the 1.3 per cent recorded in July.

The Canadian Dollar began the week trading against the US Dollar in the region of 0.9713 and ends the week trading in the region of 0.9743

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Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.

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