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Today's currency update

Thursday 23rd July 2015

Written by TorFX

Pound Sterling
On Wednesday the Bank of England’s (BoE) meeting minutes drove the Pound higher across the board, with the British currency returning to trend close to an 8-year high against the Euro. The minutes may have shown a majority vote to keep interest rates on hold, but they also hinted that as many as three policymakers are likely to push for higher borrowing costs at the August policy gathering. Greek developments meant that the GBP/EUR currency pair did give up some of its gains on Thursday but a strong UK retail sales print may see the British asset recover ground in the hours ahead. 
Ahead of the publication of the Eurozone’s Consumer Confidence Index for July, the Euro was trading in a modestly stronger position against both the US Dollar and Pound. The news that Greek MPs voted to pass reform measures in order to progress bailout negotiations increased the appeal of the common currency as the development was seen to further reduce the odds of Greece exiting the Eurozone. Today’s sentiment report is expected to show a reduction in confidence – a result which may weigh on the Euro. 
US Dollar
The US Dollar rallied on Wednesday after the US published its House Price Index, which met forecasts for a 0.4% month-on-month increase, and Existing Home Sales data, which revealed a much stronger-than-anticipated 3.2% annual gain. Although the Pound remained trending above 1.56, ‘Cable’ could slide today if the UK’s retail sales report disappoints or the US initial jobless/continuing claims figures print more strongly than expected. 
Australian Dollar
A more modest than predicted uptick in Australian inflation kept the Australian Dollar under pressure yesterday. Remarks from Reserve Bank of Australia (RBA) Governor Glenn Stevens, which indicated that another rate cut would be considered, also contributed to keeping the ‘Aussie’ close to a six-year low against the Pound. The South Pacific asset failed to derive much benefit from the increase in the NAB Business Confidence report despite the sentiment gauge climbing from 0 in the first quarter to 4 in the second. 
New Zealand Dollar
The Reserve Bank of New Zealand (RBNZ) opted to cut interest rates during last night’s policy meeting, as expected by economists. However, the decision to reduce the cash rate by 0.25% had already been priced into the market to a certain extent and some industry experts had been anticipating a larger reduction to borrowing costs so the ‘Kiwi’ actually advanced following the announcement. 
Canadian Dollar 
Faltering commodity prices and bets that the BoE will look to raise interest rates while the BOC remains locked in an easing cycle saw the Pound Sterling to Canadian Dollar (GBP/CAD) currency pair advance to a fresh six-and-a-half year high on Wednesday. Today’s Canadian Retail Sales data is likely to have an impact on Canadian Dollar exchange rate movement. Consumer spending is believed to have increased by 0.6% in May, month-on-month, following the -0.1% drop recorded in April. 
South African Rand
With yesterday’s South African inflation data coming in below forecast levels, the Rand declined against the US Dollar. Today’s South African Reserve Bank interest rate decision is likely to impact the emerging-market currency. Given the inflation result it appears unlikely that the central bank will look to hike interest rates at this juncture. 
*This report comes courtesy of TorFx, a leading foreign exchange broker

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