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Aussie & Kiwi decline over US presidential outcome

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Pound Sterling

The Pound has weakened against the Euro and Dollar after Bank of England deputy, Charles Bean warned against over-optimism following last week’s better-than-expected GDP growth figure of 1%. He warned that UK growth may be weak in the final three months of the year. The warning has caused the markets to raise bets that the Bank of England could implement further monetary easing measures causing investors to seek safe havens in the US. The Pound remains exposed to the risks from the Eurozone, another factor that is dragging on the currency.

US Dollar

The ‘Greenback’ saw relatively low trading at the end of last week, despite a better-than-expected GDP figure. The US economy posted a modest improvement of 2% highlighting the slow but steady pace of the American recovery. Against the Canadian Dollar, ‘Cable’ came close to reaching parity after advancing almost 40 pips after the data’s release.

This week Dollar traders should be aware that there are a number of key economic indicators due for release. Tuesday sees the release of the latest Consumer confidence figures, Manufacturing PMI on Thursday and finally on Friday the all-important Non-Farm Payrolls figure. Each piece of data has the potential to create market volatility. Concern is growing in the markets as the US Eastern seaboard awaits the arrival of Hurricane Sandy, it is unclear what sort of damage the storm will inflict but it could be in the billions of Dollars range.

The Euro

The Euro has weakened against the majority of its peers as investors grow concerned ahead of today’s meeting between Italian Prime Minister Mario Monti and his Spanish counterpart Mariano Rajoy. The two leaders are in disagreement over how best to resolve their nation’s debt problems with neither leader willing to commit to a bailout. Their hesitation has seen confidence in the Euro waver and frustration increase as the markets patience wears thin.

Australian Dollar

The ‘Aussie’ has declined as concerns rise over the outcome of the US Presidential election and demand for higher-yielding assets was reduced. The currencies losses were limited however as traders reduced bets that the Reserve Bank of Australia will cut interest rates at next week’s policy meeting. Future traders have increased their bets that the currency will start to make its first gains against the US Dollar for the first time in four weeks.

New Zealand Dollar

The ‘Kiwi’ has followed its Australian relation trading downwards against most of its major peers as US President Barrack Obama and his opponent Mitt Romney entered the final stretch of the presidential contest. Opinion polls have tightened in recent days making the final election result tough to call.

Canadian Dollar

The ‘Loonie’ weakened for a third week against the US Dollar on Friday before steadying as commodity prices improved. The currency was also boosted by the better-than-expected 2% increase in US GDP. Traders are expecting the currency to weaken once more as Hurricane Sandy could have a significant impact on oil prices in the region which could have a negative effect on the Canadian Dollar.

South African Rand

The Rand is expected to take its direction from end of month data due this week, but the currency is expected to remain on the defensive due to a wider budget deficit and recent credit rating downgrades. This week's releases include September’s trade data, unemployment and manufacturing figures and vehicle sales.