The Pound failed to breach the 1.6300 mark again yesterday as US Consumer Confidence jumped to a 7-month high of 70.3, which reflected positively on the US economy as consumer spending equates to nearly 70% of economic activity in the States.
• Draghi urges EZ leaders to act – reminds Germany of the importance of a strong Eurozone.
• Bundesbank investigating OMT – detrimental to Euro sentiment.
• US Consumer Confidence grows – hits 7-month high of 70.3.
• Canadian Retail Sales rebound – from -0.3% to +0.7%.
With little developments directly related to the UK economy, attention turned to Britain’s closest trading partner: the Eurozone. European Central Bank President Mario Draghi gave a speech yesterday in which he reiterated his classic slogan: “The Euro is irreversible.” Draghi went on to urge politicians in the 17-nation bloc to take advantage of the current period of calm in the marketplace. His comments appeared to be aimed largely at leaders in Italy and Spain who have not yet requested the financial aid neccessary to unleash Draghi’s bond-buying programme.
The ECB leader took a diplomatic stance towards Germany as he acknowledged their desire to ensure that Central Bank intervention remains above board, but reminded the Bundesbank of the extent to which the German economy has benefitted the Eurozone. Between 1999 and 2010 intra-European trade increased from 25% of GDP to 40%, and 1.5 million jobs in Germany now depend on Euro-area income.
Euro sentiment was damaged yesterday as German newspaper ‘Bild’ ran a story indicating that the Bundesbank and the European Central Bank have employed a team of lawyers to examine the legality of Mario Draghi’s new bond-buying programme. The ECB President maintains that the Outright Monetary Transaction programme falls within the Central Bank’s remit, because the current climate of dangerously high bond yields has been negatively impacting the effective transmission of monetary policy. The OMT has not been initiated yet, much to the detriment of market sentiment towards the single currency, and any further complications could derail Draghi’s efforts to inspire confidence in the 17-nation bloc.
With Spanish Prime Minister Mariano Rajoy remaining reluctant to request financial aid, markets are beginning to reflect this uncertainty with the yield on Spanish 3-month bills rising to 1.203% compared to 0.946% at ud the previous auction. On top of that, speculation that Greece will need to force another €30 billion of spending cuts on its angry, hungry and poor population also proved detrimental to the Euro.
GBP/EUR reached a 2-week high of 1.2600 in the morning, but consolidated at around 1.2550 to erase Sterling’s daily gains.
The Pound failed to breach the 1.6300 mark again yesterday as US Consumer Confidence jumped to a 7-month high of 70.3, which reflected positively on the US economy as consumer spending equates to nearly 70% of economic activity in the States. Although positive data emanating from the world’s largest economy is usually supportive of riskier assets, GBP/USD slid by around 0.7 cents during the afternoon to mark a 0.3 cent daily loss for the Pound.
Canadian Retail Sales rebounded from June’s -0.3% contraction to a bullish +0.7% in July, smashing analysts’ expectations of a 0.2% improvement. Of the 11 sectors measured in the survey 8 posted positive developments, with motor sales and general merchandise sales excelling the most, which led to Derek Holt from Scotiabank to comment that “the details are as strong as the headline, much stronger than consensus.” Sterling declined by 0.3 cents against the Canadian Dollar in response to the data release.
Sterling improved by a third of a cent against the Australian Dollar yesterday as commodity prices, which hold massive influence over the ‘Aussie’ due to Australia’s lucrative export industry, continued to stutter. The Antipodean currency was also hurt by civil unrest in Spain, which decreased the likelihood of a risk-boosting start to the ECB’s bond-buying programme.
New Zealand Dollar
Sterling managed to hold onto yesterday’s gains as the situation in the Eurozone failed to inspire markets with confidence; worries regarding Greece’s next aid payment persist, rioting in Madrid makes further austerity measures extremely tough to implement, and speculation in Germany that the ECB’s intervention scheme could be illegal dampened sentiment towards the ‘Kiwi’ Dollar.
Data Released Today
12:00 EUR German Consumer Price Index (YoY) (SEP P)
14:00 USD New Home Sales (AUG)
- Pound to Euro, US Dollar exchange rate: The Pound to US Dollar exchange rate briefly rose above 1.5900 to mark a fresh 3-month high of 1.5912
- Pound Sterling, the Euro and US Dollar exchange rate news flash – The Pound failed to make any headway against the U.S Dollar yesterday
- The Pound to Euro Exchange Rate has been fluctuating around the 1.200 mark this week
- Pound to Euro, US Dollar exchange rate: The Pound remained relatively stable yesterday
- Pound to Euro, US Dollar exchange rate: Another day another Dollar for Sterling yesterday as the Pound appreciated against all of the major currencies