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Pounds risk sentiment and negative UK economic date

Published on 9 February 2017 in News - Pages by Raffick Marday

Pound Sterling

Yesterday was a bad day for the Pound as risk sentiment and negative UK economic date conspired to leave the UK currency down against practically all of the majors.

Net Consumer Credit dropped from £0.8 billion to £0.6 billion compared to an expected £0.4 billion, Net Lending declined from £0.3 billion to £-0.4 billion compared to an expected £0.4 billion, Mortgage Approvals fell from 50.5K to 44.2K compared to an expected 48.0K in June and GfK Consumer Confidence remained at -29. The bearish data added to last week's poor GDP print to dampen investors' sentiment towards the Pound.

The Pound is currently trading in the region of 1.2795 against the Euro and 1.5694 against the US Dollar.

US Dollar

Yesterday the US Dollar grew by 0.2 cents against the Pound and 0.25 cents against the Euro. However, the 'Buck' lost out on 0.44 cents to the Australian Dollar, 0.5 cents to the Canadian Dollar and 0.25 cents to the New Zealand Dollar. The 'Greenback' made gains against the stuttering European currencies but was unable to fight past the raging wall of risk appetite that allowed the commodity-correlated currencies to rise.

bad day for the Pound due to risk sentiment

Markets are still waiting for the Central Bank decisions later in the week, if a rumour of coordinated action between the European Central Bank, the Bank of England, and the Federal Reserve proves to be accurate then the US Dollar could be set to fall further against the majority of its currency peers. However, if the speculation proves fruitless the 'Buck' will most likely post substantial gains as investors lose trust in riskier assets.

Currently, the Dollar is trading is trading in the region of 0.8154 against the Euro and 0.6373 against the British Pound.

The Euro

The Euro struggled yesterday as the Spanish economy posted -0.4% negative growth in their Q2 GDP results, the rating agency Standard & Poor's gave the Eurozone a 40% chance of sliding into a double-dip recession, the Eurozone Economic Confidence data slipped by 2 points to mark the fifth consecutive month of shrinkage and some investors grew wary of a potential disappointment at Thursday's ECB meeting.

The Euro lost out to the high-beta currencies but failed to make inroads against its safe haven counterparts yesterday as increased weaknesses in the 17-nation bloc highlighted the gargantuan task that Mario Draghi faces in trying to turn the economic fortunes of the currency union around.

The Euro is currently trading in the region of 1.2261 against the US Dollar and 0.7817 against the British Pound.

Australian Dollar

Monthly Private Sector Credit fell from 0.5% to 0.3% in Australia through June, however, the annual figure improved from 4.0% to 4.4%. This result was too mild to affect the wide-ranging global trend to buy riskier assets. Subsequently, as markets relied on stimulus hope, the 'Aussie' was able to post further gains against the majors as it benefitted from its extremely attractive yield values.

Currently, the ‘Aussie’ is trading in the region of 0.6708 against the British Pound, 0.8582 against the Euro and 1.0521 against the US Dollar.

Pounds risk sentiment and negative UK economic date

New Zealand Dollar

The current risk-on climate allowed the New Zealand Dollar to post gains of 1.3 cents against the Euro, 0.3 cents against the Pound, and 0.2 cents against the US Dollar. The 'Kiwi' Dollar was also helped along its way as the NBNZ Activity Outlook increased from 20.8 to 24.0 and the NBNZ Business Confidence figure improved from 12.6 to 15.1.

Currently, the New Zealand Dollar is trading in the region of 0.5166 against the Pound, 0.8101 against the US Dollar and 0.6609 against the Euro.

Canadian Dollar

The Canadian Dollar grew by 0.4 cents against the Euro, and 0.3 cents against the Pound yesterday as it benefitted from both its domestic strength and risk sentiment flows - on the hope that global prospects would increase the demand for Canadian exports. The Canadian Dollar also posted a 0.3 cent daily gain against the US Dollar as growing risk appetite curtailed safe haven flows across the border.

Currently, the ‘Loonie’ is trading in the region of 0.9986 against the US Dollar, 0.8145 against the Euro and 0.6368 against the British Pound

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