US Dollar falls on peers as support for interest rate hike grows

Claire Hogarth21/Oct/2014Currency Updates

GBP

A day of mixed fortunes for the UK currency after it improved substantially on the Dollar, gaining by 0.35% but falling slightly on the single currency, declining by 0.05%.

Sterling rose to its strongest position against the Dollar in over a week during trading yesterday after a Rightmove report on late Sunday evening showed that house prices rose by 2.6% MoM and 7.6% YoY in October. UK government bonds also climbed for the first time in three days after Barclays pushed back its forecast for the first BoE interest rate hike from November to February next year. This adds to a number of major financial institutions that have already pushed back their forecast, with international growth outlook and a lack of growth in domestic inflation leaving BoE Chief Economist, Andy Haldane, “gloomier” on the state of the UK economy. Many economists are now suggesting that the UK recovery appears to be losing its edge.

With no major announcements or releases in the UK today, focus will be firmly on the release of the Bank of England MPC minutes on Wednesday and the GDP figures on Friday morning.

EUR

The single currency advanced on the Dollar by 0.3% on Monday, but was under increasing pressure from the Pound as the markets settled down from last week’s frantic activity which saw the Euro gaining almost 1.2% on Sterling. Concerns over the health of the Eurozone economy continue after data released early yesterday morning showed that the Producer Price Index in Germany fell by its greatest amount since February at -1.0%. The index, which measures the average changes in prices in the German primary markets, has fallen every month since August last year.

While there were no other major releases yesterday, both Industrial Sales and Industrial Orders in Italy posted their biggest decline since October last year of -2.3% and -3.2% YoY, despite improving MoM in August. The Eurozone Current Account also disappointed, falling over €2.5 billion to €18.9 billion in a day which saw the Euro fall for the third consecutive day against the Pound.

USD

The Dollar fell 0.3% versus its major peers on Monday as traders continued speculation on the Fed’s pace for interest rate increases amid slowing global growth. Both the Euro and the Pound strengthened against greenback after Dallas Fed President, Richard Fisher, announced that his view on interest rates remained unchanged. He voiced his continuing support to end the Fed’s monthly bond buying programme and said he sees “no reason” not to increase rates by spring of 2015. The greenback is now in the midst of its biggest weekly decline on the Euro since April.

A few sales related announcements worth noting in the US today. The Redbook index, representing sales of general merchandise retailers, is released at 1:55pm followed by the Existing Home Sales Change for September which is expected to yield a slight improvement on last month.

Rest of the world

Further declines for the Brazilian Real as the currency fell by 1% against the USD, the most by any of the 31 major currencies. The Real has now lost almost 9% of its value since the beginning of September as the race for presidency in the country has become too close to call with the latest polls showing a dead heat ahead of the announcement on Saturday.

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Written by Claire Hogarth

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