Welcome to the Pure FX account of the latest changes in the foreign exchange rates.
This is intended as a brief guide to movements in the exchange rates overnight, to put you in the best position for when you exchange currencies.
And China gets in on the central bank stimulus act! The Australian dollar is up almost a cent against the pound today, as is the New Zealand dollar, as China’s central bank makes its biggest weekly cash injection in history, spurring hopes for Australia and New Zealand’s export markets.
China’s central bank injected 365 billion yuan ($57.8 billion) into the financial system this week, to counter a shortfall in foreign investment as the Asian tiger’s economy slows, and as industrial profits fall for the fifth straight month. The move is intended to keep the wheels turning in China’s industrial base.
This benefited the Australian and New Zealand dollars because, of course, China is a major trade partner for both these countries. Hence, anything China’s central bank does to prop up China economy, tends to have knock-on benefits for the Australasian continent too. As Mitul Kotecha at Credit Agricole CIB notes: “If you do see more speculation of help for China that will be a big factor supporting the Aussie.”
However, it’s worth pointing out that the Australian dollar could have climbed higher on these reports, if not for troubling news out of Spain limiting risk sentiment. Yesterday, Spanish bonds climbed above 6.0% for the first time since the European Central Bank announced its bond buying scheme three weeks ago, signalling the markets have become impatient with Mariano Rajoy’s dithering.
In addition, Mr. Rajoy is set to unveil the 2012/13 Spanish budget today, which is expected to spell out yet more cuts and tax rises, further depressing Spain’s economy. Spanish region Catalonia meanwhile yesterday fixed a 24th November date for its next election, widely seen as a poll as to whether it should secede.
All that will keep the markets biting their nails over the Iberian country, both depressing risk appetite, and potentially the euro too.
It’s in fact a packed day for data releases. The UK releases its third revision of Q2 growth figures, expected to reveal an upward bounce to –0.4%, up from –0.7% in the first estimate. That would give the pound a boost if it were so.
The United States meanwhile reveals its own Q2 growth estimate, as well as this week’s initial jobless claims. In Germany last of all, unemployment figures are released, expected to show that Europe’s biggest economy continues to buck the trend where rising joblessness is concerned.
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