Friday’s market analysis

Currencies Direct July 29th 2016 - 2 minute read

Friday 29 July 2016 – Market analysis

This week the Bank of Japan’s (BOJ) monetary policy decision was released, which saw the central bank easing monetary further by increasing exchange traded fund (ETF) buying. Despite this, exchange rates remained the same, which also kept the monetary policy base unchanged.
Elsewhere, today the market awaits the release of an euro area inflation date. Investors expect to see an upward surge in this inflation following a higher-than-expected rise in German HICP.

The past week once again proved tough for the pound. On Thursday, the GBP/EUR exchange rate fell to its lowest levels in almost two weeks as investors sold off sterling and bought the euro throughout the day amid opposing economic expectations.
Worse-than-expected reports of the effects of the UK’s decision to exit the European Union (EU), on the jobs market also had a negative impact on the pound, dragging it even lower. Many market investors believe that the Brexit decision could be behind Lloyds Bank’s decision to speed up its job and branch cutting process.
There are no signs of pressure on the pound easing next week either, as the market awaits next Thursday’s Bank of England (BoE) meeting.
As trading draws to a close, the euro looks to end this week on a high after an advance on Thursday following positive data that increased investor appetite. Unemployment rates in both Germany and Spain dropped significantly, which also strengthened the single currency.
An unexpected rise in eurozone economic confidence, services confidence and the Business Climate Indicator had low impact, also providing a boost for the euro.
It is hoped that next week the euro will be strengthened further if Friday’s eurozone July CPI estimates come in above expectations.
Following the BoJ decision, the USD/JPY has amplified much anxiety among investors, with little sign of the world’s second most traded currency pair showing much risk. However, the pair has not shown signs associated to extreme circumstances like abrupt changes in direction or low-liquidity surges.
August is expected to be an interesting month for US dollar trade, with the USD/GBP exchange rate likely to gain momentum in any direction, and with confirmed breakout, trend should be slightly easier to anticipate.

As the week draws to a close, the Canadian dollar to US dollar exchange rate looks largely unchanged after levelling out following highs early in the week.
Consistent weakness surrounding crude oil prices in Canada continued to weigh heavily on the CAD, with the barrel of West Texas Intermediate breaking below the barrier, or fresh three-month lows.
Later today in the National Assembly (NA) session, this will remain exposed thanks to the recent release of advanced US Q” GDP figures and May’s GDP results in Canada. In addition to this, further data will see the release of the Reuters/Michigan index for the current month.

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