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Weekly currency roundup – US budget concerns dominate sentiment

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Pound Sterling The Pound began the week softer against the Euro after Angela Merkel won a landslide victory in the German elections. The result was seen as a positive for stability in Europe and sent the Euro slightly higher against Sterling. Disappointing economic data releases for the UK and negative comments from a Bank of England policy maker kept the currency down against its rivals on Tuesday.

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Midweek the Pound’s fortunes once more went positive after data showed that retail sales in the country climbed to a yearly high. As concerns over the US economy affected market sentiment the Pound soared to a three-and-a-half year high against the Canadian Dollar and rose against the riskier commodity based currencies.

On Friday Sterling made gains against the US Dollar, rising close to its highest-level for eight-months after Bank of England Governor Mark Carney told a UK newspaper that he sees no reason for the use of further stimulus measures. Data also showed that UK consumer confidence rose to its highest-level in six-years.


US Dollar

The ‘Greenback’ had a mixed week as economic data and political uncertainty took the shine off of the USA’s economic recovery. On Tuesday the currency softened after consumer confidence fell unexpectedly and on Wednesday Durable goods data came in below expectations. Concerns over the possible shutdown of Federal government departments have dominated investor sentiment and ongoing uncertainty over whether the Federal Reserve will begin to taper its monetary easing programme continues to spook the markets.


The Euro

The Euro began the week higher as it rode the wave of optimism generated by Angela Merkel’s election win. However, as the week progressed the single currency softened and stayed relatively static against its major peers. As the week progressed the Euro came under increasing pressure as political tensions in Italy and concerns that lending has slowed in the region caused investors to doubt the strength of the Eurozone’s recovery. The currency made a weekly loss against the Pound after positive news form the UK sent Sterling higher. Concerns over the situation in the US have also piled on the pressure.


Australian Dollar

The ‘Aussie’ found some support at the start of the week from positive economic data out of China. As China is Australia’s biggest trading partner the news that its manufacturing sector expanded above forecasts saw the Australian Dollar advance against its peers. As the week progressed the currency tumbled from a three-month high against the US Dollar as the markets grew spooked by speculation over the US Federal Reserve’s monetary easing programme. As the week came to an end the ‘Aussie’ was on course to make its first weekly decline in September as demand for riskier assets waned as fears over a US government shutdown spooked the markets. The currency looks set to fall further ahead of next week’s Reserve Bank of Australia policy meeting as speculation rises that the Bank may choose to make another interest rate cut.


New Zealand Dollar

At the start of the week the ‘Kiwi’ dropped from its highest-level in almost five years against its Australian counterpart and weakened against the majority of its most traded peers as investors increased their bets that the Reserve Bank of New Zealand will choose to raise interest rates by April next year. As the week progressed the currency weakened further as concerns over the US debt ceiling and monetary easing programme came to dominate investor appetite.

As the week came to a close the currency followed its Australian relation downwards as news from the United States dominates market sentiment. If politicians cannot agree to lift the nation’s debt ceiling next month then Federal government will shut down creating plenty of risk aversion in the markets.


Canadian Dollar

The ‘Loonie’ spent the week lower against most of its peers due to the value of Canada’s biggest export of crude oil falling to its lowest level since July. As the week drew to close the currency slumped to a weekly low against the US Dollar after the USA’s economic expansion improved in the second quarter of the year and as the number of US citizens claiming jobless benefits fell by a bigger than expected margin.


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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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