US Dollar falls against peers as Euro regains ground

Claire Hogarth07/Oct/2014Currency Updates

Another slow start to the week, with limited data releases of any note. After its poor performance of late the Euro was able to regain more ground on both Sterling and the greenback as the day progressed, with the USD declining on its major counterparts from a four year high reached last week.

GBP

A muted day of movement in cable, yet, the Pound was able advance on the Dollar to some extent, appreciating moderately as the greenback struggled slightly on Monday. Despite briefly recovering during the afternoon, Sterling fell overall during London trading on the Euro, declining by around 0.2% after further pressure was heaped on the ECB to implement more policy action.

No major announcements within the UK either yesterday or today, however, the Office of National Statistics will be releasing Industrial and Manufacturing Production outputs for August at 09:30am. Both are expected to show strength for the Pound, with increases on last month’s predictions.

EUR

Further bad data coming out of the Eurozone failed to affect the strength of the Euro as the single currency rose against both the Pound and the Dollar during morning trading on Monday. While still remaining well down on both currencies over the past few weeks, the single currency was able to climb 0.2% on the Pound and by almost 0.5% versus the Dollar over the course of trading on Monday.

An earlier report by Sentix, an internet based capital market survey, showed that investor confidence within the region has fallen to a figure of -13.7 in October, lower than last month and below what economists had predicted. In addition, factory orders within Germany fell in August by 1.3% YoY and by 5.7% on July’s data. This decline, potentially caused by a weak Germany export market, will further pressure the ECB into more aggressive policy action, with most strategists expecting EUR/USD to be pushed down further in the coming weeks and months.

USD

The Dollar weakened during the day against its major peers with the US Dollar Index falling from its four year high of last week by 0.4% amid increased speculation and debate over when the Federal Reserve will raise interest rates. Fed chair Yellen now faces a dilemma over when the central bank should raise rates after recent economic data has been uneven. While the US jobless rate decreased last week to a six year low, the participant rate measuring those either employed or actively seeking employment, fell to just 62.7%, its lowest level in over 35 years. Minutes from the FOMC released on Wednesday may give further indication on when this hike will be made.

No major data releases in the US from Monday that caused any degree of market volatility. At 8:00pm London time tonight, the Federal Reserve will, however, be releasing the consumer credit change for August, with a positive figure seen as bullish for the USD.

Rest of the world

Overnight, both Australia and Japan announced their interest rate decision and, as was widely expected, both countries chose to keep rates unchanged. Japan maintains its six year low rate of 0.1% while Australia’s record low rate of 2.5% will continue, having now been in place for 14 months.

The South African Rand was another one of the major currencies to gain on the dollar, strengthening by as much as 1% yesterday as South African bonds advanced. This after the new Reserve Bank Deputy Governor was announced, with markets responding well to the Government´s choice.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.