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Pound Sterling

The Pound has made a third day of gains against the Euro after Standard & Poor’s cut Spain’s sovereign debt-rating. The group blamed the cut on the mounting economic and political uncertainty emanating from the debt stricken nation; as a result Sterling strengthened by 0.1% against the single currency. The gains are expected to be temporary however as the prospect of further Bank of England monetary easing increased.

Against the US Dollar the Pound was little changed and still holding just above the 1.60 mark.

US Dollar

The ‘Greenback’ has hit a one-month high against the Euro due to demand for safe havens being boosted by Standard & Poor’s decision to slash Spain’s debt rating. The currency climbed as high as 80.205, a level not seen since the 11th September this year. The Dollar is expected to continue to rise against the single currency as the markets grow increasingly nervous over the situation in the Eurozone. The US economy looks set to be heading in the right direction for a recovery after the latest Federal Reserve survey (called the ‘Beige Book’) showed that growth had improved in most of its regional banking districts. Home sales and prices have risen indicating that confidence is slowly returning to the world’s biggest economy.

The Euro

The Euro weakened against a number of its major peers after Standard &Poor’s cut Spain’s credit rating by two levels. It was slashed from BBB+ to BBB- and now has a negative outlook for its long term outlook. Spain has been the biggest concern for investors in recent months as the country dithers over requesting a bailout. Spain is holding off asking for external assistance, which would if granted, pave the way for the European Central Bank to utilise its new scheme of buying bonds of struggling Eurozone states that ask for aid to help reduce their borrowing costs.

Australian Dollar

A strong increase in the number of fulltime jobs created in the Australian economy has caused the ‘Aussie’ to strengthen despite reports suggesting that the nation’s jobless rate is spiking to its highest level in two-and-a-half years. The unemployment rate for September rose to 5.4%, the worst result since April 2010. Economists had expected a jobless rate of 5.2 per cent from 5.1 per cent in August. The numbers were skewed by an increase in people seeking work known as the (participation rate) which rose to 65.2 per cent from 65 per cent in August, offsetting a monthly gain of 32,100 fulltime jobs. Economists are predicting that the currency will make further gains.

New Zealand Dollar

The ‘Kiwi’ has fallen against the Australian Dollar due to the strong jobs data out of Australia. Against the Euro the ‘Kiwi’ has made gains due to Spain’s sovereign debt rating being cut and the mounting speculation that the embattled country will soon request a bailout. If the Spanish do bite the bullet and make a request we could see a risk rally that would benefit the ‘Kiwi’, if no request comes then risk sentiment is sure to suffer.

Canadian Dollar

The ‘Loonie’ has slumped to a four-day low against the US Dollar as concerns over the health of the global economy drag on the risk sensitive currency. The weakening of commodity prices and warnings from the International Monetary Fund over slow growth caused investors to seek shelter in the safe haven ‘Greenback’. Most commodities, including copper and aluminium were down and weighed on the Canadian currency. If oil prices lessen due to the global uncertainty then we can expect to see the currency weaken further.

South African Rand

The Rand has edged upwards against the US Dollar after some of the striking workforce of truck drivers went back to work. The currency is struggling to remain above a three-and-a-half year low after investors continue to be concerned that the nation’s labour unrest is far from over. The Rand has taken a serious beating after the markets eye the strikes as a threat to Africa’s biggest economy. Over 100,000 workers across the country have downed tools in their bid to get better wages and working conditions. With no end in sight for the unrest the Rand will remain highly volatile.

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