European Central Bank begin plans to ease Italian borrowing costs

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Pound Sterling

The Pound has hit a 3-month high against the US Dollar, a 7-week high against the Japanese Yen and a 2-week low against a buoyant Euro. The changes follow growing expectations that the European Central Bank will soon begin its plan to ease Italian and Spanish borrowing costs. Anticipation from investors that the actions will begin next month emboldened investors and boosted higher risk currencies including the Pound.

Yesterday’s revelation that the UK government borrowed more-than-expected for July caused a drag on the Pound as investors sold the currency in favour of the Euro. Sterling made gains against the US Dollar due to the fall in demand for safe havens due to the optimistic picture from Europe.

Currently the Pound is trading in the region of 1.267 against the Euro and 1.579 against the US Dollar.

US Dollar

The Dollar has made gains against a number of its peers ahead of the release of data that may show an improving picture in the US house market. It is predicted that the sales of existing homes in the US probably climbed to a 4.51 million annual rate last month from a 4.37 million pace in June. The increasingly improving data out of the world’s most powerful economy has dampened expectations that the Federal Reserve will implement a third-round of quantitative easing. The ‘Greenback’ has advanced 7.1% in the past 12 months, making it the best performing currency alongside the Australian Dollar among 10 developed-nation currencies.

Currently the US Dollar is trading in the region of 0.633 against the Pound and 0.802 against the Euro.

The Euro

The European Central Bank’s statement that it would begin to take action to lower the spiralling borrowing costs for Italy and Spain has seen the Euro climb to a two-week high against the US Dollar. Traders are remaining cautious however and expect any gains in the euro to be capped, probably keeping it below the early August high of 79.63 pence due to uncertainties over the effectiveness of ECB bond-buying and worries about a weak Eurozone economy. Tomorrow’s purchasing managers indexes are predicted to show continued contraction in German and French manufacturing, with the measure for the Euro-area as a whole forecast to indicate shrinkage for a 13th-straight month.

Currently the Euro is trading in the region of 0.788 against the Pound and 1.245 against the US Dollar.

Australian Dollar

The ‘Aussie’ is trading slightly down after a $30billion expansion of one of Australia’s biggest mines was put on hold. Mining giant BHP Billiton’s indecision has knocked confidence in the strength of the country’s mining investment boom.  The outlook for the Aussie Dollar is starting to look less certain, with a cluster of high-risk events now looming, including key decisions on the outlook for Europe and the US.

Currently the Australian Dollar is trading in the region of 0.664 against the Pound, 0.840 against the Euro and 1.048 against the US Dollar.

New Zealand Dollar

The ‘Kiwi’ has fallen ahead of the release of data that is expected to show that global manufacturing is struggling to recover. In Asian trading the currency
slipped against most of its peers as traders wait to see the result of tomorrows Chinese and European purchasing manager’s indexes. As a result the Kiwi halted its two-days of gains against the US Dollar and slipped against the Euro.

Currently the New Zealand Dollar is trading in the region of 0.512 against the Pound, 0.648 against the Euro and 0.808

Canadian Dollar

The ‘Loonie’ has weakened from its four-month high against the US Dollar after a decline in equities increased risk aversion. The currency had risen to its highest level since the 3rd of May thanks to increased demand for its biggest export of crude oil. The ‘Loonie’ was also affected by a report by Statistics Canada that showed that wholesale sales fell by 0.1% in June instead of rising by the predicted 0.3%.

Currently the Canadian Dollar is trading in the region of 0.810 against the Euro, 0.640 against the Pound and 1.010 against the US Dollar.