is4profit Weekly Currency Roundup
For small businesses who need to keep an eye on how worldwide currency is performing, what is affecting it and what to keep an eye out for, we bring you the latest currency roundup for the week ending Friday the 6th July…
The Euro has seen a week of declines and falling confidence after last week’s ‘key’ summit of European leaders in Brussels. As the outcome of the summit was revealed the currency saw a surge against a basket of currencies but all too quickly the optimism turned into pessimism. After the initial euphoria over the fact that EU politicians could actually agree to things, investors quickly began to see the weaknesses in the proposals. For the first few days of the week the currency has remained relatively high as it rode on the crest of the generated confidence wave.
On the 29th of June the day after the plans were announced, the Euro hit a yearly high of 1.269 before gradually dropping to the 1.25 region. Thursday saw the European Central Bank (ECB) cut the Euro zones interest rates to a record low of 0.75% a move that did little to bolster confidence in the currency. Shortly after the rate cut was announced the Euro plummeted to a five week low against the US Dollar and record lows against commodity currencies such as the Australian Dollar.
By Friday the Euro was facing the possibility of falling back into the same dismal pattern seen before the EU summit. Spain saw its borrowing costs once again breach the 7% mark as investors once again grow nervous over the Euro situation. The Euro also hit a three and a half year low against the Pound its lowest level since November 2008.
Things to look out for this coming week are the latest German CPI figures and the ECB’s monthly report.
The US currency was the biggest loser from the positive outcome of last week’s EU summit. It led to demand for safe haven currencies declining as risk sentiment improved. Against the Euro the ‘Greenback’ fell to 0.78 before ending the week at 0.811 following the collapse of investor confidence in the plans made by the EU leaders. As faith in the deal fell over the course of the week the Dollar quickly recovered its losses.
On Friday however the currency suffered a blow after the latest job figures out of the country were far lower than what the experts expected indicating that a worrying slowdown in the US economy maybe under way. Just 80,000 new jobs were created in June. That’s way below expectations of 100,000, and makes the second quarter the worst for two years. The unemployment rate remained unchanged at 8.2pc in June. The recent run of weak economic data has fuelled speculation that the U.S. central bank could deliver more stimuli when its next meeting concludes on August 1.
Despite the disappointing figures it is expected that the currency will make gains as investors continue to regard the Dollar as a safe haven from the Euro crisis.
Thing to look for next week are the release of the latest report on the Federal banks monthly meeting due for release on the 11th of July.
The Pound ended last week on a high against the Euro after EU leaders revealed their plan to offer further assistance to Spain and Italy to help curb the Euro crisis. The currency ended the week trading at the 1.571 level against the US Dollar and 1.204 against the Euro. Initially confidence in the single currency was high and benefitted the UK currency as investors were more open to risk and placed greater faith into the Pound. As the week progressed, the Pound hit a three and a half year high against the single currency after the European Central Bank announced its new record low interest rate of 0.75%., much to the displeasure of investors. On the same day that the ECB made it’s rate cut the Bank of England also announced measures to bolster the country’s economy. It decided to implement a further round of quantitative easing (QE) of the sum of £50billion. The Pound is expected to continue to make gains against the Euro as investors turn to the Pound for a safe haven. A drawback of the QE is that the Pound is bound to post losses against the commodity currencies of New Zealand and Australia.
The thing to watch out for next week is the latest GDP estimate on the 10th of July.
The Yen has seen its status as a safe haven is both a godsend and a detriment this week as political infighting and worries over exports dominated the Japanese currency. Ministers have been arguing over the best way to handle the country’s struggling economy, even seeing an eminent politician defect from the government. As the Euro crisis rears its ugly head once more investors are flooding back to the Yen for its safe haven status artificially raising the currencies cost and potentially damaging exports, a situation the Japanese central bank is doing its best to rectify. The bank has lifted its regional economic assessment, citing improvements in investment across all of the country’s regional economies.
The thing to watch for next week is the Bank of Japan’s interest rate decision due for release on the 12th of July.
The ‘Aussie’ hit its highest level against the US Dollar since May 4th on Monday. The currency was riding high after the EU summit on the 29th of June calmed investor nerves and increased confidence in the currency. As the week progressed the ‘Aussie’ fell slightly after China released its PMI figures midweek. The world’s second largest economy posted a fall in productivity but limited the impact by having its central bank cut its lending rate to 6% which benefitted the ‘Aussie’. By the end of the week the currency had hit a high of 83.13 Euro cents trading in the region of 82.96 Friday morning. The currency maintained its strong position against the US Dollar thanks to the Reserve Bank of Australia maintaining its 3.5% cash rate.
New Zealand Dollar
At the beginning of the week the ‘Kiwi’ hit a fresh two month high against the US Dollar. Its strength came after the EU summit outcome bolstered confidence in the Oceanic currencies. The New Zealand dollar rose to 78.35 against the Aussie from 78.6 the week before. As the week progressed the currency maintained its highs against the ‘Greenback’ but suffered losses after the US job figures were released.
The ‘Loonie’ started the week following the same pattern as many of the other major currencies in trading higher against the ‘Greenback’. Canada posted improved job figures seeing increases in confidence and led to the Canadian currency post its biggest gains since November.
Against the Euro the Canadian Dollar has hit a two year high after the European Central Bank cut its interest rates to a record low, it also saw gains against the Pound following the Bank of England’s decision to implement further quantitative easing. At the end of the week the Canadian dollar made losses against a basket of peers in the wake of weak American jobs data and sliding oil prices.
The loonie slipped by 0.26 of a cent at 98.32 cents as traders also took in weak domestic job creation figures from Statistics Canada. The agency said just 7,300 jobs were created in June slightly better than expected.
Currency update provided by TorFX – FSA Authorised Currency Brokerage. For more information and to request a free quote, visit www.torfx.com