Commodity Currencies (AUD, NZD, CAD) Recovering from Black Monday Decimation, Euro Retreats from Multi-Year Bests as Demand Falls

Published: 25 Aug at 1 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, China, Germany, Greece,

Pound Sterling
Black Monday and global fears of an impending financial crisis were without a doubt the dominant influences on the currency, with the consequent 4.7% slump of the FTSE 100 weighing heavily on Sterling. Chances of the Bank of England (BoE) electing to raise interest rates before the end of the year were all but wiped out in the turmoil and any faith in the ability of the UK economy to weather the potential upcoming storm was shaken. However, as the majority of markets have entered rallies, with the FTSE 100 in particular having now recovered more than half of its losses, the Pound has mostly regained its footing today.

Euro
Although European shares were equally hit by panic selling yesterday the single currency benefitted from dramatically increased demand as traders looked to secure their positions with the comparative safe-haven. Making significant gains across the board, reaching fresh multi-year highs against the commodity bloc, the Euro was buoyed in spite of continued concerns over the political situation in Greece. Better than anticipated results on the German IFO surveys this morning were ultimately outweighed by a reversal in form on most of the global stock markets that saw appetite for the lower-risk currency fall.

US Dollar
The Dow Jones shed a mammoth 1089 points at the start of trading in its last session, the single biggest decline of its kind, before recovering somewhat as the initial furore died down. While Federal Reserve Bank of Atlanta President had expressed confidence that a Fed hike remained a near future possibility earlier in the day, this major rout raised suggestions that interest rates might in fact be loosened before the end of the year on the state of the global economy. This prospect drove investors away from the standard safe-haven currency to instead take refuge with rivals such as the Euro and Yen.

Australian Dollar
China’s slowdown and its impact upon the commodity market weighed heavily upon the value of the ‘Aussie’, pushing it to multi-year lows against most of the majors. A disappointing result on this morning’s Conference Board Leading Index for June, however, was swiftly overshadowed as stock markets, with the exception of those in China, began to rally overnight as panic abated. Slight gains in value for materials such as copper have also helped prop up the antipodean currency today as it claws back lost ground.

New Zealand Dollar
With the tide of trade turning today the ‘Kiwi’ has rallied to pull itself away from the various lows it had struck against rivals on Black Monday. Comments yesterday from Reserve Bank of New Zealand (RBNZ) Deputy Governor Grant Spencer which indicated that a rise on domestic interest rates was likely ‘off the table’ for the near future did not do much to assist the floundering currency. Rebounding stock markets, along with the decreased chance of a September hike by the Fed, have allowed the New Zealand Dollar to recover somewhat today though.

Canadian Dollar
Oil values plunged to levels not seen since 2009 in yesterday’s chaos, with US crude closing at $38.24 and Brent at $42.69, to drag the ‘Loonie’ down still further. The global glut continues to show no signs of decreasing amidst naturally decreasing demand from the slowing Chinese economy, which has less buying power on the back of the weakened Yuan. As the markets improved today, with traders less influenced by panic, the outlook for the ‘Loonie’ and its key commodity has nevertheless brightened as Brent and US crude have both risen since the start of trading.
As of Tuesday, 25th August 2015, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.3616, GBP USD exchange rate was 1.5697, GBP AUD exchange rate was 2.2017, GBP NZD exchange rate was 2.4209, GBP CAD exchange rate was 2.0918, and GBP CNY exchange rate was 10.0665.

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