Weekly Currency Roundup - GBPUSD approached lowest level in 6 weeks

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Pound Sterling – On Monday the Pound was little changed as economists awaited the release of data which was expected to show that the number of people in the UK claiming unemployment benefits fell for a sixth consecutive month in April adding to hopes that the nation’s economy is making a recovery.

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On Tuesday it halted a three-day decline against the US Dollar after an industry report showed that UK house prices climbed to their highest level in almost three years last month. According to the Royal Institution of Chartered Surveyors the home-price index rose to 1 from minus 2 in March, the first reading above zero since 2010.

The Pound then pared losses with US Dollar as investors awaited the release of the Bank of England’s quarterly report of economic analysis and inflation projections. Against the Euro, Sterling rose from a three-week low on expectations that unemployment claims fell by 3000 in April. The data came in better-than expected boosting optimism that the UK was on track to make a recovery.

By the end of the week Sterling had weakened against the US Dollar due to increasing speculation that the US Federal Reserve is coming closer to deciding to end its monetary stimulus program. Sterling approached its lowest level in six-weeks as the speculation boosted the US currency. So far this year the Pound has declined by 2.2% making it the third worst performing currency behind the Japanese Yen and Australian Dollar.

 

US Dollar

The ‘Greenback’ made gains against the majority of its peers after economic data took economists by surprise. US retail sales unexpectedly increased in April,

boosting optimism that the world’s largest economy is on course to make a strong recovery. Against the Japanese Yen the ‘Greenback’ reached its highest level since 2008.

The ‘Greenback’ hit a six-week high against the Euro and rose to its highest overall level in ten-months due to improving sentiment towards the US economy. The positive data released over the past few weeks has increased speculation that the Federal Reserve will reduce stimulus.

On Friday the Federal Reserve’s policy makers to announce that they will be altering the pace of their monthly bond purchases. A Federal Bank president said that the Bank may start to begin tapering off bond purchases as early as this summer.

 

The Euro

On Tuesday the Euro declined for a third day against the US Dollar after the Eurozone regions GDP contracted for a sixth-straight quarter The Euro then  weakened further against the US Dollar and Sterling after European Central Bank policy-maker Ignazio Visco told a news website that the Eurozone’s Central Bank could cut its deposit rate into negative territory.

Midweek, the Euro tumbled to a six-week low against the US Dollar and weakened against the Pound after data showed that the German economy grew at a slower than estimated rate. German GDP rose by just 0.1% whilst the French economy contracted by 0.2%. The weaker-than-predicted The Euro then weakened for a sixth consecutive day against the Dollar, its longest losing streak in a year.

 

Australian Dollar

The ‘Aussie’ declined to an 11-month low against the US Dollar this week and has continued to decline against its most traded peers due to data showing that business confidence fell and as speculation rises that the Reserve Bank of Australia will make further interest rate cuts in a bid to curb the currency’s strength.

 

New Zealand Dollar

The ‘Kiwi’ fell after a report suggested that the US Federal Reserve is planning to slow its policy of quantitative easing, a move that will increase the attractiveness of US Dollar assets. The New Zealand Dollar strengthened against the Euro after house prices in the country rose by 9.8% in April, the biggest annual increase since 2007.

The ‘Kiwi’ hit a four-year high against its Australian relation but fell against the rest of its peers after the New Zealand government’s annual budget disappointed investors. Economists had been hoping that the government would announce a round of spending; instead they only loosened the purse strings slightly.

On Friday currency tumbled to its lowest-level in a year against the US Dollar due to the expectation that the US Federal Reserve will announce a slowdown to its bond-buying programme.

 

Canadian Dollar

At the start of the week the ‘Loonie’ strengthened against the majority of its peers after the release of strong retail sales data out of the US. The currency managed to make gains against the New Zealand and Australian Dollars despite crude oil declining for a third consecutive day.

By the end of the week however, the currency came close to a three-week low against its US relation, declining for a fifth time in six days as a regional Federal Reserve president said the Central Bank may begin slowing its monthly bond-buying as the labour market strengthens.

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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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