is4profit Weekly Currency Roundup (13th July 2012)
For small businesses keeping an eye on how worldwide currency is performing, what’s affecting it and what to look out for, here’s the latest currency roundup for the week ending Friday the 13th July…
This week has seen the Euro suffer record lows and big drops in confidence. On Monday the currency posted a two year low against the US Dollar and hit a three and a half year low against the British Pound. Worse-than-expected job figures out of the United States and a decline in China’s productivity saw investors flee to the safe haven currencies of the Dollar and Japanese Yen. The struggling currency also wasn’t helped by European leaders such as Mario Monti saying that Italy could be interested in using the Eurozone rescue funds.
Fears of contagion continue to grow after several Eurozone countries posted weak economic data and poor job figures. In the middle of the week the German high court held a hearing as to whether the euro zone’s bailout fund, the European Stability Mechanism (ESM), and planned changes to the region’s budget rules are compatible with German law; a result is not expected for months, raising further uncertainty in the currency bloc.
On Thursday the Spanish Prime Minister, Mariano Rajoy, gave investors further reasons to worry after he announced growth killing austerity measures for Spain. The country is on the brink with youth unemployment close to 50% and the higher taxes being imposed on an already angry population. Yesterday’s miners’ riots are set to be the tip of the spear for Spain unless some of the pressure can be eased. The Euro is currently trading in the region of 0.790 against the Pound and 1.222 against the US Dollar.
To round off a week of doom and gloom for the Euro the single currency was weakened further by the news that Italy received a two-notch ratings downgrade. The credit ratings agency Moody’s slashed the nation’s credit rating to just two notches above junk status and warned that further cuts are on the cards. The news piled more pressure on the Euro, which was down to $1.2190, not far off a two-year low of $1.2166 hit.
Things to look for next week are the release of the Eurozone CPI figures on the 16th, economic sentiment figures from Germany on the 17th and German producer prices report on the 20th.
The ‘Greenback’ has been the second biggest winner this week as investors continue to flock to the US in order to find a safe haven away from the gloom emerging from Europe.
The combination of poor jobs figures out of the States and concerns that the Chinese economy is on the verge of a slowdown at the start of the week gave the currency a big surge against its peers. By midweek the Dollar hit a two year against the Euro but made a loss against the Japanese Yen as bets grew that the Japanese central bank will refrain from implementing further quantitative easing measures in an attempt to temper the Yen’s appreciation.
To round off the week the currency hit a new high against the British Pound and maintained a strong run against the Euro as it was bolstered as a safe haven. It did see slight losses against some of the riskier currencies after the Chinese posted expected GDP figures and Investors chose to take a chance with the riskier currencies despite continuingly bad news out of the Eurozone.
Things to look for next week are the US advance retail sales report on the 16th and CPI on the 17th and the Feds monetary policy report.
The Pound began the week by hitting a fresh 3 ½ year against the Euro as worried investors sought a safer alternative to the troubled single currency. The Pound also benefitted from the lacklustre response to the outcome of the European finance ministers meeting. Tuesday saw the release of the June NIESR GDP estimate with the report showing that the UK economy is still entrenched in recession with GDP falling to -0.2% in June down from +0.1% in May.
The figures dispelled any optimism that the country had made a rebound in its growth figures. June was the fifth month this year, out of six readings, that showed that the UK economy has contracted. Thursday saw the Pound hit a monthly low against the US Dollar after the U.S. Federal Reserve released minutes for its June meeting.
The result lowered expectations of further quantitative easing, which added to the demand for the US currency. Sterling fell to $1.5456, its lowest level since June 12th, with traders citing stops below $1.5440. The currency could make further losses against the Dollar if the Eurozone crisis continues to escalate and forces markets to become more risk averse.
Things to look for next week are the CPI report on the 17th and the Bank of England’s minutes for June on the 18th.
The Yen has been the biggest winner this week after its reputation as a safe haven saw it strengthen against all of its currency peers. The currency hit a one month high against the US Dollar this week after the Greenback suffered a small weakening thanks to the outcome of the Federal Reserve’s minutes showing that no further easing will be put in place. The Bank of Japan decided on Thursday that it would not be following the pattern of other nations by raising or cutting interest rates. The bank said that it saw no need to take further action as all the signs point to economic growth for the country.
Things to look for next week are the Japanese industrial activity index for June which is released on the 19th of July.
The ‘Aussie’ began the week trading at its weakest level for ten days thanks to last week’s weaker than expected US jobs data. The currency saw itself strengthen as the week wore on thanks to good economic data, even hitting a new record high against the Euro of 0.837. The gains were short-lived however after a double whammy of poor jobs data and signs that its biggest trade partner China were slowing down. On Friday the currency recovered some of the losses after a GDP for China posted a result that the markets were expecting.
Things to look for next week are the AUD reserve bank minutes for July on the 17th.
New Zealand Dollar
The ‘Kiwi’ followed the same pattern as its Aussie neighbour for the week. On Monday the currency hit a new record high of 65.07 against the Euro. The Chinese data release saw the markets ease their panic selling of the commodity currencies. Despite the reprieve from China the ‘Kiwi’ is under threat from the markets’ disappointment at the lack of policy response from both the U.S. Federal Reserve and Bank of Japan, and lingering concerns over the Eurozone.
The ‘Loonie’ spent much of the week down against its US neighbour and followed a similar pattern to the Australian and New Zealand Dollars. By the end of the week it began to rise against the ‘Greenback’ as oil prices rose and confidence began to filter back into the commodity orientated currencies.
This currency update was provided by TorFX – FSA Authorised Currency Brokerage. For more information and to request a free quote, visit www.torfx.com