British Pound Plunges to new 10 month low
• USD ISM Manufacturing PMI out at 56.5 versus expected 57.7, prior 58.4
• GBP British Manufacturing PMI out at 56.6, versus expected 56.3, prior 56.6
• EUR unemployment rate out at 9.9%, versus expected 10.1%, prior 9.9%
• CAD GDP m/m out at 0.6%, versus expected 0.4%, prior 0.4%
• AUD Cash Rate out at 4.0%, versus expected 4.00%, prior 3.75%
• AUD Building Approvals m/m out at -0.7% versus expected 0.1%, prior 2.2%
• AUD Retail sales m/m out at 1.2% versus expected 0.8%,prior -0.7%
• GBP Halifax HPI m/m (out between March 2nd to 5th)
• GBP Construction PMI (0930GMT)
• CAD overnight rate (1400GMT)
• GBP Nationwide Consumer Confidence (tomorrow 0001GMT)
• AUD GDP q/q (tomorrow 0030GMT)
• EUR Minimum Bid Rate (Thursday 1245GMT)
• GBP Official Bank Rate (Thursday 1200GMT)
After a relatively slow end to last month, the forex market is set to be hit with a fresh wave of volatility within the next few days, as the month of March kicks off with four central bank’s rate announcements.
Early this morning the Royal Bank of Australia resumed raising interest rates, after keeping its steady last time at 3.75%. The RBA governor Glenn Stevens increased the cash rate by a predicted 0.25bps to 4.0%. The Aussie fell to 89.82 U.S. cents at 5:31 p.m. from 90 U.S cents just before the decision was announced. Over the course of the past year, the AUD has gained a record 42% against the American Dollar, making it the best performer among the most-traded currencies.
Australian retail sales rose more than expected in January; however, building approvals unexpectedly fell. Retail sales rose 1.2%, rebounding from the largest decline in 10 months, however, building approvals slumped 7% in January – compared to analysts’ forecasted 1% increase. A 29.1 per cent slump in ”other dwellings”, such as townhouses and apartments, dragged down the overall number, while private sector house approvals rose 0.3% in the month. A separate report showed that this unexpected fall in home-building approvals fell in January as result of the RBA’s rate hikes, as well as reduction in government grants to first-time buyers.
At half past midnight tomorrow, the Australian Bureau of Statistics will release its quarterly GDP. After a disappointing rise of 0.2% in the third quarter of last year, analysts are predicting a slightly larger increase of 0.9%, for the final quarter of last year.
The RBA’s encouraging rate hike will be followed by later today by the Bank of Canada announcing their overnight rate. While all analysts agree that the BOC will need to raise their interest rates at some point this year, the chance of it occurring tomorrow is relatively minute. Economists predict that the BOC will hold its benchmark interest rate at its current record low level of 0.25%, putting the central bank in the same position as the U.S Federal Reserve, the European Central Bank and the Bank of England (the ECB and the BoE will announce their benchmark interest rates on Thursday – both are expected to maintain their benchmark rates at 1.0% and 0.5% respectively). While none of the previous mentioned central banks are disputing the fact that the period of a “loose” monetary policy must soon come to an end, for the time being they are refraining from making any sudden movements out of concerns that the economies are still fragile.
Yesterday the Canadian Dollar surged against its American counterpart, on the back of higher than anticipated GDP. The GDP beat expectations and rose by an annualized 4.0% in the fourth quarter of last year fueled by an increase in retail sales, consumer spending, exports and robust housing sector. The USD/CAD plummeted from a session highs of 1.0575 to hit a new session low of 1.0475. The loonie appreciated a total of 1.04% yesterday against its U.S counterpart, to close at $1.04106.
Across the Atlantic, the pound tumbled to a new 10 month low as fears continue to grow that the UK will have a hung parliament. The currency fell 1.6% against the greenback, dropping below the $1.5 mark, for first time since May, as the Labor party’s majority narrows. The Pound suffered across the board sliding to its lowest level against the Euro since early last December, as well as hit a one-year low against the Japanese Yen of 132.07 and plumbed its weakest in 25 years against the high-yielding Australian Dollar.
Despite a better than expected manufacturing PMI, the Pound brushed the news that the manufacturing sector remained at its previously reported 15 year high of 56.6. Out later today, the construction PMI is predicted to show to that house price have continued to rise in the last seven months, however, the rate of increase is expected to have slowed from 0.6% in January to 0.3% in February.
The Euro continues to rally on the back of an anticipated bailout for the Greek debt crisis. Olli Rehn, the EU Commissioner for Economic and Monetary Affairs visited Greece and asked the government to announce new measures in the coming days. Following Mr. Rehn’s comments, the Euro appreciated slightly against the USD, gaining 0.15% to reach a $1.35930. While reports suggest that German banks might help Greece by buying more Greek bonds, German Chancellor Angela Merkel denied the existence of such a plan, saying that Greece needs to sort out their own deficit problems. Greek officials are expecting to seal a deal by Friday, when Greek Prime Minister George Papandreou is to meet with Angela Merkel in Berlin – the meeting will determine if what if any, Europe-wide assistance Greece receives.
The U.S. dollar surged against most other major currencies on Monday, after data showed the U.S manufacturing sector grew in February, although at a slower rate than expected. Manufacturing expanded in February for its seventh consecutive month, confirming that the world’s largest economy is emerging rapidly from the recession. The greenback was up against the pound and euro, with GBP/USD plunging 2.04% to hit 1.4930 and EUR/USD shedding 0.64% to hit 1.3536. It also rose against the yen and Swiss franc, with USD/JPY rising 0.33% to reach 89.16 and USD/CHF gaining 0.72% to hit 1.0813.
Written by Finexo.com