The March of the Greenback

3 December, 2014

Simon Eastman

Tuesday saw ecostats from all the major economies resulting in some big swings from the pound, euro and most notably the US dollar as well as the antipodean currencies.

The day kicked off with UK PMI, this time for construction, which missed its forecast of 61 coming in a fair bit lower at just 59.4. Although above the 50 mark showing growth in the sector, it’s clearly heading the wrong way and this puts a bad light on the British economy. The pound/euro exchange rate dropped over half a cent following the release, although did pick back up as US markets opened after lunch as American investors digested weaker EU inflation figures from earlier in the day which came in at -0.4 percent rather than the predicted -0.3 percent. Over the rest of trading the euro lost most of its gains against sterling and a whole cent against the US dollar.

During the American session we saw some low key data releases, along with a speech from Fed chief Janet Yellen and the release of construction spending figures which posted higher than forecasts. All in all they were dollar positive and gains were made across the board, as mentioned a cent against the single currency and similar against the pound.

As US markets opened we also saw a dramatic drop in the value of the Kiwi dollar which lost a cent to sterling in a matter of seconds. This was due to a drop of 1.1 percent in the Global Dairy Index which was announced yesterday and demonstrates the continued drop in dairy prices across the world and the  implications for some global economies.

dairy exchange rates

After a drop of 1.5 cents during yesterday’s trade, the Aussie had GDP to contend with overnight. For those sending money down under the cost got that little bit cheaper overnight when the expected 3.1 percent growth figure came out at 2.7 percent and the Aussie lost a further 1.5 cents to sterling. In real terms, buying A$ 500,000 this morning compared to this time on Monday is £3300 cheaper now – that’s a lot of shrimp for the barbie!

Today we have seen Swiss GDP already this morning where we expected 1.4 percent YoY growth and 0.3 percent for QoQ, up from the last reading of 0 percent. The result was better than expected with a 1.9 percent reading but with an upwards adjustment to last months reading the increase was less impressive and the Swissie has yet to gain much off the back of the positive growth stats.

Coming up throughout the rest of trade we have German, EU, UK and US Markit services PMI, EU retail sales, Bank of Canada interest rate meeting and policy statement including a speech from governor Poloz and the key ISM non manufacturing PMI from the US.

Plenty to go on today whether its Canadian, US, Aussie or New Zealand dollars, euros or pounds you’re looking to buy or sell, we will see volatility for sure, so stay in touch with the CI team to avoid getting caught out.