Great Britain and the Euro zone fundamental news reports out yesterday can only be described as atrocious. The German ZEW (Consumer Confidence) result (-3.8 points) wiped out any Monday Euro gains and now German growth forecasts have been cut. The Euro suffered appropriately. How many traders and investors bought the British Pound after the Scottish Independence vote was decided, thinking, wow, now the Pound will really strengthen? Great Britains inflation data missed expectations annihilating the Sterling currency by a whopping 200 pips against the US Dollar. Other currencies to get hit were the Swedish Krona and how about the Norways NOK. Norways economy has relied upon their tremendous Oil reserves but as prices in Oil have declined it has placed Norway in GDP trouble, as the Krona has slid in value over the past 6 months which relates directly to when the price of Oil started dropping.
According to AT Partnerships, both the New Zealand Kiwi and the Aussie Dollar did not fare well yesterday and gave up all Monday gains. The general theme with the Aussie is that it is still overvalued and with an investing risk off environment, further weakness is to be expected, also, the RBA not too concerned as a weak Dollar is good for exports.
The Canadian Dollar, the CAD, is also a commodity currency with huge developing Oil reserves (Alberta tar sands) which cost a lot more money to extract and separate the Oil from the sand than standard drilling. Now with Oil dropping so much in price, it puts many companies in jeopardy as their profit margin dwindles. July 01 was the day the CAD started it spiral down against the US Dollar losing a value of 7 dollars over the next four months. Other OIL shale companies, especially in the US, will start feeling the fear as another 3 Dollar OIL price drop yesterday will intensify debate around oil Company board meetings no doubt!
So when it looked like the mighty US Dollar was showing some cracks, it has quickly and efficiently silenced any doom-sayers, so far this week anyway. The Dollar was stronger against most all currencies yesterday and upon Asian open is not slowing down.
September and October have really increased the importance of news releases and its affect on price surges and volatility. This is not a surprise to investors as seasonality plays a large part in their strategies. Today will be no exception, as ECBs Draghi speaks, unemployment changes out of Great Britain, retail and Inflation data from the United States will all surely rock the currency markets to and fro.