Inflation Rises But Unemployment Unchanged
The Pound made solid gains against the Euro and most other major peers on Tuesday after data showed that inflation in the UK increased more-than-expected last month to 1.9%, just off of the Bank of England’s target of 2%. Against the US Dollar the Pound briefly touched a new six-year high before easing later in the session. The strong inflation figure increased expectations that the Bank of England will raise interest rates before the end of the year. Today the release of the latest UK unemployment data showed no change at 6.5%, hitting forecasts and will likely see the Pound push higher.
The US Dollar climbed to a one-month high against the Euro but was stuck close to a six-year low against the Pound. The ‘Greenback’ edged higher as it found support from comments made by Federal Reserve Chairman Janet Yellen. The Fed governor suggested that the nation’s interest rates could rise sooner than expected if the economy continues to show improvement. The US Dollar is likely to see volatility during Wednesday afternoon due to the release of a number of data reports on PPI and Industrial and Manufacturing production.
The Euro was weakened further yesterday after the latest ZEW institute sentiment index data disappointed. Sentiment in Germany waned to a four-year low with the ZEW index falling to 27.1 points. Economists had been calling for a shallower decline to 28.0. The Euro may soften further today as it is unlikely that the Eurozone’s latest balance of trade data will come in positively following a recent run of disappointing production reports.
The ‘Aussie’ declined against the US Dollar as demand for the US currency increased following yesterday’s speech by Federal Reserve Chairman Janet Yellen. Her comments that interest rates could rise sooner than expected strengthened the ‘Greenback’ at the ‘Aussie’s’ expense.
New Zealand Dollar
The New Zealand Dollar declined to a three-week low against the US Dollar and fell against the Pound following the release of weaker-than-forecast domestic consumer price inflation data. The inflation rate remained unchanged at 0.3% in the second quarter, worse than forecasts for a rise to 0.4%. Comments by Federal Reserve Governor Janet Yellen also weighed upon the ‘Kiwi’.
The Canadian Dollar was weaker on Tuesday as oil prices fell and as last week’s disappointing employment data continued to weigh. Today the ‘Loonie’ has inched higher as concerns over Libya, Iraq and Ukraine once again raised fears over oil supplies. Investors are looking ahead to today’s Bank of Canada interest rate decision and manufacturing sales data. A stronger performance in sales is likely to offer support but if BOC Governor Stephen Poloz talks down the currency we could see further declines.
South African Rand
The Rand slipped closer to a ten year low against the Pound and is struggling against the majority of its other major peers as a strike in the metal workers sector continues to weigh heavily upon sentiment towards the South African currency.
Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.
Pete Southern is an active trader, chartist and writer for market blogs. He is currently technical analysis contributor and admin at this here blog.
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