Bolt blasts world record
The general consensus at present is that the global recovery is still 'on', though investors seem to be see-sawing between optimism over recovery and handwringing over its sustainability. This week has been relatively quiet on the data front with the euro continuing to trade at firm levels, while sterling sentiment remains downbeat.
In the UK, the release of the MPC minutes revealed the Committee was split 6-3 over its currency QE policy. Governor Mervyn King and two others voted to QE by GBP75 billion, but were outvoted as the MPC opted to inject a further GBP50 billion into the economy. This came as a surprise to investors and led to downward pressure on sterling exchange rates as it showed MPC members are still unclear over the depth of recession, and the best way out of it.
UK retail sales also rose 0.4% in July - a 14 month high - and inflation came in at a surprisingly resilient 1.8%. This indicates a robust retail sector which is good news for the pound. Sterling sentiment was dampened however, by the budget deficit which showed a GBP-8 billion deficit, the highest since 1993.
In the eurozone thing have been slightly rosier, with the single currency trading at firm levels in the absence of major data. German investor confidence rose to a three-year high, reinforcing the view that recession is easing and the euro has remained in the region of USD1.42 and GBP0.86.
Positive news in the eurozone has helped to bolster eastern European currency exchange rates, with zloty climbing 4.5% against the euro in the last month. However the region remains deeply affected by recession, with retail sales in Russia sliding by -8.5%, the most in over a decade.
US jobless claims were more negative than expected, edging the dollar higher against the euro and pound as the number of new claims rose by 576,000 in the week to August 15. Leading indicators also came in at an underwhelming 0.6% and the Philadelphia Fed showed only a modest improvement in manufacturing.
In other currencies, the Australian and New Zealand exchange rates fell mid-week, following concerns over Chinese stocks, though they have since recovered this ground. The Canadian dollar also rose against the greenback following strong inflation data, supporting the central banks view of rate hikes in future.
So while foreign exchange markets have entered a period of greater stability, the path to recovery is likely to remain uncertain. When it comes to currency transfer, Currency Solutions provide you with excellent exchange rates and a personal currency broker to help you save time and money. To see how much you could save, send us an enquiry today.
Have a good weekend.