Good afternoon, I am pleased to enclose the latest Pure FX market commentary.
Sterling surged to a 10-month high against the euro, as the European Central Bank made an emergency cut to interest rates to stop the threat of deflation
The pound shed 2 cents against the US dollar, as America created almost 80,000 more jobs than forecast, upping the odds of a Fed "taper"
Sterling had it tough against the Aussie, but may rebound, as Reserve Bank of Australia chief Glenn Stevens predicts the currency will soon be "materially lower"
The pound dived against the kiwi dollar too, but soon picked up, as NZ central bank head Graeme Wheeler said New Zealand may soon raise interest rates, but then backtracked
Sterling took its cues from James Bond in October, because it seems The World('s strongest growth) Is Not Enough! This is to say, the pound fell against currencies ranging from the US dollar to the New Zealand dollar, in spite of the fact that the UK expanded +0.8% between July and September. So, if the UK is going gangbusters, why didn't the pound rise? Well, for one, it's because many economists remain sceptical that the recovery has got legs. The story goes that consumption is being fuelled by people running down their savings, so when the put of gold goes dry, the UK will again slow down. Second, there's the fact that the Bank of England remains dearly attached to its forward guidance, and insists it won't raise interest rates until late 2016. With this in mind, 2013 may be the year the UK economy was a world-beater, but sad to say, the pound isn't following in its footsteps!
How does the pound say hello to the euro? "Hiya!" Sterling reached its highest against the euro since January 17th recently, at more than 1.20. However, this has little do with the fact that the UK economy has stepped up a gear. Instead, it's because the European Central Bank took the drastic step of cutting interest rates to 0.25%, to stop the threat of deflation in the Eurozone. That came down on the euro like a ton of bricks, leading the pound to triumph!
The taper is back on the menu! Sterling fell 2 cents against the US dollar last month, chiefly because the US economy performed far better than forecast, raising the odds that the Federal Reserve will cut (or "taper") its economic stimulus. For instance, America created 204,000 jobs in October, 79,000 more than forecast. Moreover, US factories expanded at their fastest rate since April 2011. Owing to this, the US dollar came out ahead, to sterling's loss!
On top of the world, but not for long? The Aussie dollar hit 0.60 against sterling at its peak in October, yet odds are high the Aussie will weaken from hereon. How come? Well, because Reserve Bank of Australia chief Glenn Stevens has seemingly decided that enough is enough with this overpriced Aussie, and has stepped up his rhetoric to bring the antipode currency down. Last month, he forecast that the Aussie would be "materially lower" in the near future. Given this, look for the Aussie to go even further "Down Under" versus the pound than it already is!
New Zealand dollar
Like a under-fuelled Ryanair flight, the New Zealand dollar soared the skies in October, gaining 3 cents against the pound, but then was forced to make an emergency landing, and shed all its gains. Why? Well, we can pin the blame on Reserve Bank of New Zealand boss Graeme Wheeler. Early in October, Mr. Wheeler announced that New Zealand would be the first developed nation to raise interest rates since the financial crash. However, when the kiwi rocketed as a result, potentially crippling New Zealand's export industries, the RBNZ chief was quick to backtrack. Hence, the up-down kiwi!
Up, up and away! Sterling touched its highest since February 2010 versus the loonie dollar last month, at 1.6950. How come? Well, on the one hand, it's because Bank of Canada governor Stephen Poloz finally conceded what's been written on the tea leaves for some time, that Canada's economy is now too weak to raise interest rates. And on the other hand, the UK economy went hell-for-leather between July and September, growing +0.8%, the fastest expansion in 3 years, giving the pound a decided upward lift!
I hope this helps and to find out how all this will impact your foreign exchange transactions, please feel free to contact either myself or your Currency Dealer directly.
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