Euro Strengthens Considerably
Sentiment towards the Euro has strengthened and concerns about the Greek debt crisis have considerably receded as the third bailout deal received approval from the various European Parliaments last week. Across the Atlantic, Chicago Fed’s activity index and remarks by a key Federal Reserve policymaker will be noted later today.
There are no major macroeconomic indicators in the UK today to influence trading in the Pound against its key peers. Meanwhile, investors will await cues from economic data over the coming month on the future stance of the Bank of England on interest rates. In light of this, the second official estimate of economic growth data in the UK, due later this week, will draw a lot of market interest.
Pound Sterling – UK Markets
Sterling appears to be losing ground against the Euro this morning, amid an absence of any notable macroeconomic indicators today to influence trading in the Pound. Traders have been monitoring UK economic data closely amid expectations that the Bank of England might implement a change in its monetary policy sooner than anticipated. The unexpectedly positive consumer price inflation figures had boosted the Pound against the greenback last week. However, gains in Sterling were short-lived following disappointing retail sales figures. The decreasing chance of a BoE rate rise occurring before the end of this year has dampened the appeal of the Pound and benefited its key currency counterparts such as the Euro.
Going forward, the UK economic calendar appears to be light in terms of significant economic releases that could trigger volatility in Sterling against its key peers. The second estimate of second quarter domestic economic growth data due in the final session of this week is likely to attract significant market attention.
US Dollar – US Markets
Last week, the US Dollar traded mostly lower against its major currency counterparts, as hopes for an immediate rise in the benchmark interest rate by the US Federal Reserve were diminished following a relatively dovish tone of the minutes of Federal Open Market Committee meeting for July.
The US Dollar has reversed part of its losses against the Euro and has edged higher against the Pound this morning, amid a light day of economic releases globally. One exception is the monthly update on Chicago Fed national activity, scheduled later in the day, which could attract some investor attention. Markets anticipate a moderate rise in the Chicago Fed index for July, thus adding to views that the US economy is expanding at a strong pace in the third quarter. Also, investors will look forward to remarks later today by Federal Reserve Bank of Atlanta President Dennis Lockhart, also a voting member of the Fed’s policy setting committee, for any fresh cues on the timing of a rate rise.
Euro – European Markets
In the early Asian session today, the shared currency had extended its gains and was hovering close to the 1.15 mark against the greenback as diminished optimism for an increase in interest rate by the US Federal Reserve in the September meeting benefitted the Euro. The Euro – Pound currency pair has also extended its rally and is trading above the 0.73 mark this morning. Amid the absence of any key economic data in the European economic calendar today, currency traders will focus on global economic and political developments and sentiment in the major equity markets across the globe for further direction. Going forward, a further estimate of German second quarter GDP data and Ifo survey results for current business conditions and economic outlook, scheduled tomorrow, will draw a lot of market attention.
The Euro has been trading higher against its key peers despite the resignation of Greek Prime Minister Alexis Tsipras last week. Meanwhile, Greece’s debt problems have eased slightly as it has become clear now that the cash strapped nation will receive financial aid for the months ahead.
Other Currencies – Highlights
The Canadian Dollar is currently trading lower against most of the major currencies, and the US Dollar – Canadian Dollar currency pair has surged above the 1.32 mark to trade at multi year highs this morning. The Loonie continues to remain pressured on the back of tumbling oil prices and on ongoing fears of a slowdown in Chinese economic growth. A renewed slide in commodities such as crude oil, which is Canada’s major export product, has undermined the Canadian Dollar. China is the world’s second largest energy consumer and the latest turmoil in the Chinese equity market has fuelled concerns about the health of the Chinese economy and has added to broad based weakness in the Canadian Dollar.
Meanwhile, on Friday, economic data showed that Canada’s annual inflation rate climbed to its highest level in seven months for July as higher food and clothing prices offset the impact of cheaper energy. In separate data, Canada’s retail sales rose well above market estimates for June. In the absence of any notable economic releases in Canada today, investors will monitor comments of Fed voting member Dennis P. Lockhart later in the day, for further direction.