Currency rates hits double-dip recession
Bank exchange rates news update for 2nd August 2012
Mired in an extended double-dip recession the UK economy was dealt another blow yesterday as the UK Manufacturing Purchasing Managers Index figure showed a protracted decline within the UK Manufacturing sector. The stats fell from 48.4 in June to 45.4 in July to mark the worst performance in over 3 years.
Consequently, the Pound has lost out on 1.7 cents against the New Zealand Dollar, 1.4 cents against the Australian Dollar, 0.9 cents against the Euro, 1.1 cents against the Canadian Dollar, and 1.3 cents against the US Dollar.
The Pound is currently trading in the region of 1.2660 against the Euro and 1.5539 against the US Dollar.
Yesterday the Federal Open Market Committee announced that they were planning to crack on with Operation TWIST rather than initiate a return to their easing cycle or introduce a rate cut. Despite all the evidence beforehand pointing to an outcome of this sort, many investors had been gunning for the Fed to implement QE3, so when these hopes were dashed the US Dollar managed to absorb safe haven flows and appreciate by 0.6 cents against the Euro and 0.4 cents against the Pound.
In other US economic news the ISM Prices Paid figure improved-less-than-expected in July from 37.0 to 39.5, Construction Spending improved slightly by 0.4%, despite growing by 1.6% last month the figure met analysts' targets, and the ISM Manufacturing print came in at 49.8 falling short of expectations to return to growth at 50.2.
Currently, the Dollar is trading is trading in the region of 0.8150 against the Euro and 0.6439 against the British Pound.
Manufacturing in the Eurozone continued to decline posting a terrible PMI score of 44.0 in July. The German figure also disappointed coming in at 43.0. The fragilities of the 17-nation bloc are widely known, and with all eyes on the Central Bank announcements, the single currency was not overly affected by the weak prints.
However during the evening, the Euro lost ground in the US Dollar as the first of the big three Central Bank decisions fuelled risk aversion rather than appetite. The Bank of England's announcement is expected to follow suit from the Fed's with no new stimulus, so it's up to Mario Draghi to lift global growth prospects with some economic magic later on this morning.
For the Euro to rally, Draghi will have to meet or exceed expectations of an interest rate cut plus a return to the ECB's bond-buying programme, anything less could leave the single currency exposed to risk aversion capital flows.
The Euro is currently trading in the region of 1.2271 against the US Dollar and 0.7899 against the British Pound.
Immediately following the FOMC's decision to avoid further stimulus the 'Aussie' fell by half a cent against the US Dollar, 0.45 cents against the Canadian Dollar, and 0.2 cents against the Japanese Yen as risk appetite was damaged by the Fed's reluctance to bolster the world's largest economy.
Currently, the ‘Aussie’ is trading in the region of 0.6762 against the British Pound, 0.8554 against the Euro and 1.0514 against the US Dollar.
New Zealand Dollar
The Fed did not deliver the package that traders of the New Zealand Dollar had been anticipating, rather they gave a statement that fitted precisely in line with the last 4-5 Central Bank announcements: 'further stimulus would only follow further significant deteriorations in the US economy.' The New Zealand Dollar gave up ground to the US Dollar following the announcement but posted gains across the day against the Pound due to the terrible UK Manufacturing PMI print.
Currently, the New Zealand Dollar is trading in the region of 0.5224 against the Pound, 0.8122 against the US Dollar and 0.6609 against the Euro.
The Canadian Dollar remains sensitive to risk trends because with global growth prospects rising comes a rise in Canadian exports. For this reason, the Fed's decision against further stimulus hurt the 'Loonie' and caused CAD/USD to drop by 0.4 cents. However, the Canadian Dollar was able to push on against the Pound as the gap between the UK and Canadian economy widened further in Canada's favour following the weak UK Manufacturing PMI print.
Currently, the ‘Loonie’ is trading in the region of 0.9968 against the US Dollar, 0.8112 against the Euro and 0.6388 against the British Pound