Weekly currency roundup – Uncertainty over Fed tapering created a mixed week for currencies

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Pound Sterling – it was a mixed week for the Pound as it began the week down against the US Dollar as it declined to its lowest-level in more than two weeks ahead of the sale of UK government bonds. Against the Euro, Sterling weakened for the first time in three days. On Tuesday it advanced against the US Dollar ahead of the sale of UK government bonds.

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Sterling continued…………

Against the Euro, Sterling was little changed as BOE governor Mervyn King made his final appearance before the Treasury committee. Against the Canadian Dollar the Pound hit a 19-month high as global risk appetite remained weak due to the Federal Reserve’s decision to taper its asset purchasing programme later on in the year.

Midweek it was little changed against the US Dollar and the Euro following Chancellor George Osborne’s presentation of his spending review to parliament. Osborne is aiming to save £11.5 billion by cutting spending for governmental departments.

At the end of the week however the currency weakened against the majority of its peers after GDP data came in weaker-than-expected and following negative comments from a Bank of England policy maker on the state of the UK economy. Next week sees the release of a number of PMI’s which if weaker-than-expected will see Sterling make further declines.

US Dollar

The ‘Greenback’ began the week riding high after it strengthened to a two-week high against the Japanese Yen and continued to strengthen against the majority of its peers as investors continued to speculate that the Federal Reserve will temper its monetary easing programme.  Every piece of US data that hints of an improvement for the US economy will increase the speculation around the easing of the Fed’s monetary policy.

Midweek, the currency strengthened against the Euro for a fifth-consecutive day after the US posted stronger-than-expected economic data which increased speculation that the Federal Reserve will reduce its bond purchasing programme.US factory orders beat expectations and consumer confidence data smashed economist expectations.   According to the New York based Conference Board, confidence jumped to 81.4, a figure that exceeded all forecasts and is the highest level since January 2008, from a revised number of 74.3 in May.

On Friday the ‘Greenback’ weakened slightly against the Euro following the release of better-than-expected data for the Eurozone. The improved picture for the struggling currency bloc increased risk appetite which in turn weakened demand for the safe haven Dollar.  Against other currencies the ‘Greenback’ made gains after economic data showed that the world’s largest economy is continuing to make a recovery.

The Euro

The Euro also had mixed fortunes this week after it began Monday weakened against the US Dollar as investors’ favoured the safe haven ‘Greenback’ after talks over how to set up unified banking rules collapsed. The EU’s finance ministers failed to agree on assigning losses at failing banks.

Midweek it edged up against the US Dollar and held steady against the British Pound due to a data release that showed confidence in the German economy continued to improve in June.

At the end of the week the Euro strengthened against the Pound and US Dollar after data showed that retail sales in Germany increased by a bigger-than-expected margin which added to the sense of optimism for the region.

Australian Dollar

The ‘Aussie’ continued its declines this week and began Monday down against the US Dollar as investors favoured the US currency following Federal Reserve Chairman Ben Bernanke’s speech last week. The announcement that the US Central Bank will begin to ease its monetary easing programme combined with weaker-than-expected manufacturing data out of China.

Midweek the currency briefly strengthened against the Japanese Yen and the majority of its most traded peers after China’s Central Bank reassured investors that it will do what it takes to stabilize money markets and ease the credit squeeze threatening the world’s second largest economy and Australia’s biggest trading partner.

The ‘Aussie’ then strengthened against the US Dollar and continued to make gains against Sterling as Kevin Rudd ousted Julia Gillard to become Australia’s Prime Minister. However on Friday the currency resumed its downward trajectory on Friday after three major banks lowered their forecasts for the currency. National Australia Bank cut its forecasts citing that the currency is likely to decline to US88 cents by the end of the year. The bank’s move follows those of Westpac and Goldman Sachs.

New Zealand Dollar

On Monday the ‘Kiwi’ declined against the US Dollar due to fears over China’s banking sector. The concerns sparked a sell-off of Asian currencies and caused investors to ditch risk sensitive currencies in favour of the safe haven US Dollar and Japanese Yen. The New Zealand and Australian economies are closely linked with China’s fortunes, with both countries exporting large quantities to the world’s most populous nation.

By Thursday the currency had strengthened against its peers after business confidence jumped to a three-year high in June. The currency also found support after disappointing US data cast doubt over the Federal Reserve’s plans to ease its monetary easing programme.

On Friday it held steady against its peers after Federal Reserve officials stepped up their campaign to clarify comments by Chairman Ben Bernanke about reducing stimulus that has caused volatility in global financial markets.

Canadian Dollar

The ‘Loonie’ had a week of losses against its US relation and began the week at its lowest level since September 2011 after Canada’s biggest export; crude oil fell in value. A slowdown in the nation’s consumer price index and retail sales data also weighed upon the currency.

On Tuesday the currency fell to its lowest point in almost two-years against its US relation due to increased speculation that the US currency will strengthen when the Federal Reserve decides to end its monetary stimulus programme.

On Friday it fell for the ninth day in a row due to better-than-expected US economic data highlighting the divergent growth prospects of the USA and Canada. The currency weakened against the majority of its peers as jobless claims in the US fell and the house market improved.#

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