After opening the week on steady footing following strong inflation figures on Monday, the Australian dollar lost ground throughout the week. The figures, which came in at 2.7% (up from 2.2% in the previous quarter), reduced the chances of the Bank of Australia opting for a rate cut this year. Sentiment in the market over recent months had been in favour of a cut in interest rates, with Australian policy makers looking to devalue the currency in order to boost export sales. Yesterday, however, the currency lost much of the ground it had made earlier in the week, as a report out of China showed manufacturing levels had shrunk unexpectedly. As China is the primary export destination for the Australian economy, any shrinking of its manufacturing industry could have a significant impact on Australia’s trade balance, particularly in terms of shrinking business activity levels for Australian exports.
It has been another difficult week for the Canadian dollar. Following a downward revision of their inflation forecast, policy makers announced that they were happy for the currency to weaken further in order to boost export sales for the commodity-backed economy. Therefore, it was no surprise that the currency remained at 2009-lows against sterling, despite marginally better-than-forecast retail sales figures released yesterday. Monthly inflation figures released later today could trigger further weakness.
The Japanese yen had a mixed week, losing ground against sterling particularly in the first half of the week. Following weak Chinese manufacturing data, we saw a downturn in global stocks, particularly Asian stocks, and as a result we saw a jump in demand for the traditionally safe-haven yen.
Thinking of buying other currencies? Call your trader now for live rates