All change at the top

Pound backed by inflation data

The pound continued to forge ahead on the back of inflation data, hitting a one year high against the dollar and holding its ground against the euro. Sterling was one of the best-performing major global currencies following the release of the inflation data supported by expectations that the Bank of England may take a more hawkish tone at Thursday’s MPC meeting. While a rate rise may not be on the cards just yet, it’s not entirely out of the question. The Bank of England’s Chief Economist Andy Haldane may vote for higher rates after indicating in August that he may consider voting for a rise by the end of the year, although he is just one man in a nine person committee.

US Dollar finds higher ground

The US dollar also found some renewed momentum yesterday, strengthening against the Japanese yen – although it still weakened against the pound, riding high on CPI figures. Against the euro, the greenback traded existing ranges as the rally following the ECB announcement last week seems to have lost momentum.

Australian dollar treads water

The Aussie dollar had a mixed day; it continued to push higher against the Japanese yen and the Canadian dollar, but fell against sterling and the kiwi dollar as both currencies found renewed strength. There was little movement against the US dollar as relatively positive US economic data was offset by firmer iron ore prices in Australia, leading to something of an impasse. It could be that the Australian dollar is currently treading water ahead of the jobs report due today, which may give some direction.

Polls spell good news for New Zealand dollar

A poll from Newshub and Reid Research showed that the centre-right National party had risen by 4% in the polls to suggest they are in the lead with 47.3% of the vote. The principal opposition from the Labour party has seen their support drop 1.6% to leave them nearly 10 points behind. When this news was announced, the NZ dollar jumped 1%. This is good news in the short term for the currency, which has been struggling amidst the uncertainty of the election. However, the market is aware of the potential inaccuracy of polls and wider fundamentals, such as the slump in house sales, suggesting that any gains may be only short term. The overall view is that the fate of the kiwi dollar will continue to be tied to the ups and downs of the election campaigns and any longer term trend may not emerge until after the 23rd September.

Unchecked rise of the Canadian dollar comes to an end

The rallying of some of the more beleaguered currencies yesterday was contrasted by a small fall in the Canadian dollar, which was down 0.6% against the US dollar. It was perhaps inevitable that something would check the Loonie before it flew too close to the sun – it has rallied more than 13% since early May and reached an almost two-year high at the end of last week. Despite higher oil prices, the Canadian dollar couldn’t hold out against the US dollar yesterday, which was supported by higher Treasury yields.