The Australian and New Zealand dollars were in the spotlight again, producing a surprise turnaround, while sterling is set to take centre stage in the European programme as the Bank of England prepares to announce its latest monetary policy. Robust employment data from Australia and New Zealand economies produced a sharp turnaround in their currencies. The antipodean units were beaten down earlier this week after the Reserve Bank of Australia slashed interest rates and New Zealand’s central bank warned that it may intervene in currency markets again. Federal Reserve speakers may get US dollar trading moving with comments about US monetary policy. Hawkish remarks on the back of last week’s surprise US jobs data should offer support, especially against a stronger euro. The greenback slid after economic data from China lifted risk appetite, while the euro moved to within reach of one-week highs against its US rival after Germany posted much better-than-expected industrial data for the second day running.
Sterling
Sterling will be under the spotlight with the Bank of England set to vote on whether or not it should expand its quantitative easing programme to support the British economy. Most market participants do not expect to see any changes after the central bank bolstered its Funding for Lending Scheme last month, attempting to get banks lending and businesses borrowing more. Nevertheless, the pound’s ability to make further gains, having moved close to three-month highs against the US dollar, will likely be limited until markets know more about Britain’s second quarter growth prospects.
US dollar
The US dollar may find support from Federal Reserve speakers who may revive bets that an improving US labour market will see the US central bank reduce the size of its monthly asset purchase scheme before year-end. However, the greenback slipped and remains on a weaker footing following Wednesday’s economic data from Germany and China weighed on demand for the safe haven US currency. Risk-appetite took the US dollar to a three-week low against the Polish zloty despite Poland’s central bank cutting interest rates to a record low to support its fragile economy.
Euro
The euro climbed against the US dollar after a second day of forecast-beating German industrial data dampened expectations of the European Central Bank easing its monetary policy again after cutting interest rates last week. The euro could get another lift as Spain prepares to auction debt. Firm demand for Madrid’s bonds would offer more evidence of growing confidence in holding eurozone government debt, perhaps bolstering the single currency’s allure despite worries about ECB monetary policy.