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US economy receive a mild boost

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

US economy receive much needed boost

Pound Sterling

The Pound lagged behind against its major rivals yesterday as Moody's credit rating agency cut their growth outlook for the UK economy to 0.4% for this year and 1.8% for next year. Sterling's woes continued this morning as it was announced that annual UK Nationwide House Prices fell by -2.6% in July and the UK Manufacturing PMI figure fell to 45.9. Both figures marked 3-year lows.

Consequently, the Pound has lost out on 1.7 cents against the New Zealand Dollar, 1.5 cents against the Australian Dollar, 1.1 cents against the Euro, 0.8 cents against the Canadian Dollar, and 0.8 cents against the US Dollar.

The Pound is currently trading in the region of 1.2702 against the Euro and 1.5640 against the US Dollar.

US Dollar

The US Dollar has been subject to slight declines against its major currency peers over the past 24 hours as S&P stock index futures rose overnight in anticipation of stimulus from the Federal Reserve Open Market Committee's statement later this evening.

However, Fed Chairman Ben Bernanke has repeatedly repudiated claims over the past few weeks that have suggested QE3 could be on the cards. Yesterday saw the US economy receive a mild boost from some positive data: US Personal Core Expenditure Core increased from 0.1% to 0.2% in June, US Personal Income grew to 0.5% from 0.3%, and US Consumer Confidence rose from 62.7 to 65.9, whereas economists had predicted the figure to fall to 61.5.

This continued strength in the US economy makes a move towards further easing less likely and as the result, we could see the US Dollar recoup its losses following the FOMC announcement.

Currently, the Dollar is trading is trading in the region of 0.8122 against the Euro and 0.6398 against the British Pound.

The Euro

The Euro has been trading with relative strength during the last few sessions as investors still have their hopes pinned on global growth inducing stimulus over the next two days. Mario Draghi's statement last week has sparked copious speculation that the European Central Bank could be about to embark on some kind of bond-buying excursion.

One of the possibilities is a relaxation of the Central Bank mandate to allow the ECB to help curtail struggling sovereigns' bond yield curves. Under this circumstance, the ECB would be allowed to buy up bonds to prevent yields soaring out of control and adversely affecting monetary policy transmission. Another would be to give the ESM bailout fund a full banking license, the ESM would then be able to borrow unlimited amounts of money to effectively do the same thing: buy lots and lots of peripheral sovereign debt.

If a policy of this nature were to be announced then it would give rise to a strong risk rally and could potentially take away a great deal of pressure from the Eurozone economy. On the other hand, if the ECB press conference cannot live up to its billing then the Euro is likely to crash on desperate risk aversion trends.

The Euro is currently trading in the region of 1.2315 against the US Dollar and 0.7879 against the British Pound.

Australian Dollar

The Australian Dollar was slightly unhinged during the night by the faltering Chinese Manufacturing PMI figure for July. China, Australia's largest trading partner, suffered from a slight blip as Manufacturing missed analysts' expectations of 50.5 by falling to 50.1. This combined with doubts over the ability of the ECB to contain the debt crisis in Europe caused the 'Aussie' Dollar's bullish run to slow down slightly.

Currently, the ‘Aussie’ is trading in the region of 0.6734 against the British Pound, 0.8551 against the Euro and 1.0523 against the US Dollar.

New Zealand Dollar

After briefly rising through resistance levels at 0.8135, the New Zealand Dollar has fallen back down to mark a 0.3 cent gain so far today against the US Dollar. It seems that the 'Kiwi' Dollar continues to rise on risk sentiment, but that risk rallies remain constrained by the distinct possibility that Fed and ECB stimulus may not be forthcoming.

Currently, the New Zealand Dollar is trading in the region of 0.5199 against the Pound, 0.8126 against the US Dollar and 0.6601 against the Euro.

Canadian Dollar

The Canadian Dollar managed to push on against the Pound but found it hard to make gains versus the US Dollar yesterday as rate hike expectations dropped following a disappointing GDP figure for May. April's 0.3% increase was followed by a less-than-impressive 0.1% increment in May, falling short of market expectations of 0.2% growth. The Canadian Dollar lost out by around a third of a cent to the Euro following this data.

Currently, the ‘Loonie’ is trading in the region of 0.9984 against the US Dollar, 0.8112 against the Euro and 0.6388 against the British Pound.

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