US Dollar (USD) heads for weekly gain; New Zealand Dollar (NZD) disappoints
US Dollar
The US Dollar is heading for a weekly gain after upbeat data yesterday showed that unemployment in the US is at a six-year low and non-farm payrolls in June rose well above expectations.
The positive figures suggest the US economy is recovering well, which has led to investors expecting that the Federal Reserve will raise interest levels earlier than they forecast just three weeks ago.
The ‘Buck’ rose against the British Pound during the Asian trade session today after benefitting from the upbeat data, hitting a high of 0.58. The Dollar was further bolstered by news that rapidly increasing land prices in London are causing more UK lenders to reject requests from developers suffering from the effects of surging construction costs and slowing home-price gains. Nevertheless, the ‘Greenback’ is still weak compared to the levels it showed in early June, and has been gradually easing lower against the Pound for just under a year.
Pound Sterling
Following the Riksbank cutting its main interest to 0.25% yesterday, the British Pound has continued to climb against the Swedish Krona, reaching a daily high of 11.77. Economists had forecast the interest rate would only be cut to 0.5% but the Swedish Central Bank is making added efforts to avoid the threat of Japan-style economic stagnation.
Against the Norwegian Krone, the Pound has been rising since 10th June due to dovish comments from the BoE Governor, Mark Carney, and the British currency was bolstered at 07:00 GMT today. Lower-than-expected German figures, with disappointing factory order data for May and falling construction PMI for June, strengthened GBP/EUR by 0.34%. However, after the initial surge, the Pound met resistance against the Eurozone’s positive retail PMI for last month, combined with minor data showing there had been less new car registrations in June for the UK compared to the previous year.
Euro
The Euro softened against the US Dollar today, nearing a one-week low, after disappointing German factory orders and construction PMI figures were released. The US Dollar was strengthened by upbeat employment data which has led some investors to believe the Federal Reserve will be raising interest rates earlier than previously predicted.
Against all of its major peers, the Euro has softened slightly, having come under pressure yesterday from the ECB’s emphasis on interest rates remaining on hold or at lower levels for an extended period. Eurozone Retail PMI released at 09:10 GMT came with mixed results, with positive data for Germany and the Eurozone meeting falling figures for Italy and France. The contrasting data discouraged investors from making major moves either way, resulting in the single currency remaining steady.
Canadian Dollar
The Canadian Dollar fell against the South African Rand today, following yesterday’s surge prompted by South Africa’s poor economic outlook and prolonged strikes in the metal industry. The ‘Loonie’ slumped to a low of 10.07 at 06:50 GMT, after news that Brent crude oil experienced its biggest weekly loss in six months. The Canadian Dollar nevertheless stabilised to 10.10 as a result of news that South Africa’s metalworker strike (combined with a weak investment climate) was weakening the country’s creditworthiness.
Yesterday upbeat manufacturing data and a more optimistic economic growth outlook strengthened the Canadian Dollar, but today the currency has stabilised against most of its major peers and is showing no major signs of movement.
Australian Dollar
Following yesterday’s jawboning of the Australian Dollar by the RBA, the ‘Aussie’ fell against all of its major peers. Today it appears to be stabilising, although it has still not recovered completely and against the British Pound it has a long way to climb before regaining the value it held prior to the events of the last few days. After the RBA stated that the Australian Dollar was ‘overvalued, and not just by a few cents’, the Antipodean currency has settled around the 0.54 level against the Pound but looks to be rising steadily.
JPMorgan Chase and Co’s chief economist, Stephen Walters, predicts that ‘jawboning likely will continue’, however, suggesting that the Australian Dollar may be subject to further softening in the near future.
New Zealand Dollar
Contrary to many strategists’ predictions that the New Zealand Dollar will edge up from last week’s three-year high against the US Dollar, the ‘Kiwi’ failed to fulfil expectations yesterday and after a bearish move which saw it slumping to 0.8715, the New Zealand Dollar stabilised to around the 0.8750 level, from which it has been falling ever since.
The sudden drop came as a response to the upbeat US employment data released yesterday which showed signs of the economy recovering at rates exceeding economists’ expectations. Investors predicted that the ‘Kiwi’ would succeed due to the notion of higher yields becoming available from New Zealand’s rising interest rates, but the New Zealand Dollar met psychological resistance from the optimistic US figures.
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