With sterling, the euro and the US Dollar all beginning the month in the same fashion as August finished I have turned my focus to a somewhat overshadowed currency in our daily newsletter; the Swiss Franc. A two year gallop into the realms of unheard of strength seems to be continuing as concern grows over the stability of its fellow nations. So, where will it end? The answer to that is unknown but the exporters in Switzerland hope it comes sooner rather than later. Central Bank members will be sweating buckets urgently racking their brains in search of a solution. For now though, the franc rolls on.
Pound Sterling – UK Markets
With little data due out in the UK today sterling may as well strap on a seatbelt and enjoy the Friday afternoon fun that we are undoubtedly set for. Investors will have spent the last few days balancing out their currency risk and if your interest lies with sterling then it will be down to other currencies as to which way we move today. If you’re a gambler then today will certainly get the juices flowing.
US Dollar – US Markets
As many predicted it was finally revealed yesterday that US manufacturing output slowest rate of growth in 2 years during August. Factory activity declined to 50.6 last month from a figure of 50.9 in July. A reading above the level of 50 still indicates growth but data has indicated falls in readings for the last 6 months in a row. This reading was the worst since the post economic downturn in July 2009. Despite all this, the reading was slightly better than economists had predicted. Therefore, the US Dollar actually advanced through the course of the afternoon yesterday.
Later today the US will also be releasing non-farm payroll data and unemployment figures which has the potential to make this Friday more volatile than normal. It is expected to show that the unemployment rate stayed firmly placed at 9.1 percent in August and payroll data is believed to have fallen. This combination if proved correct is likely to weaken the dollar. However, in these markets only time will tell.
Euro – European Markets
The European Central Bank has gone against the grain this year by raising interest rates on two separate occasions. However, economists are now calling on the central bank to reduce rates to prevent the eurozone economy slipping back into recession. The straw that broke the camels back on this occasion appears to be a contraction in European manufacturing and a fall in business and consumer confidence. All this has led us to believe the sharp slowdown in the second quarter will undoubtedly lead into the third.
Other Currencies – Highlights
On the back of poor manufacturing data in the US, the Canadian Dollar has advanced to almost its strongest level in four weeks against the majority of its most traded counterparts. It appears in the backlash to weak manufacturing people are looking for somewhere to put their US Dollars.
The Swiss Franc also advanced on the back of this data in a sharp turn of events. Despite the Swiss Central Bank doing their upmost to weaken the ever advancing currency, poor worldwide data means that investors are still taking to the franc.
Sterling Rises on Hopes of EU Softening Tone on Backstop