GBP Falls After Referendum Whilst USD Hits Highs Against Majors
Anthony Wu | Sep 21, 2014 08:32PM ET
The Scottish independence referendum hoo-ha is finally over. The GBP/USD almost reversed all its rebound on Friday after the final result confirmed Scotland will be staying with the United Kingdom. The less-than-300-pips bounce during last week was quite disappointing, and the slump from 1.6520 to an area below 1.63 was another sign that the pound may continue its bearishness.
Few people noticed last Tuesday that the U.K. inflation rate had continued to fall in August. Considering the lower exchange rate of the Pound, it may have pushed up import costs with the domestic goods price level even weaker. The Bank of England will probably hold the current interest rate level for longer, maintaining a negative aspect for the Pound.
Looking at other majors, the USD bull continued on Friday as it refreshed its new high against the euro, yenn and Aussie dollar. EUR/USD closed below the last-two-week sideway range, implying that the pair may start the fall again to a lower area around 1.2750, the double bottom of 2013. Even though the rise of separatism within European nations was relieved at the failed Scottish Votes, the recent Eurozone economic data may still leave the ECB no other choice but a further easing like ABS purchasing.
The prices of Iron ore hit a 5-year-low last week as the Australian future prices slumped 1.6% to US$81.70 per tonne as the Chinese port inventories remain high and steel products prices are still weak.
With contracting China demands and the expansion of major mining giants, the Iron ore price has fallen 40% this year and the trend may continue. As it is the largest export goods from Australia to China and a similar scenario occurring with coal and gold, the Aussie dollar will struggle to maintain an high exchange level from the fundamental aspect.
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The Asian stocks markets rose on Friday. The Shanghai Composite bounced 0.58% to 2329. The Nikkei 225 surged 1.58%. TheS&P/ASX All Australian 200 rebounded 0.32% to 5433. In European stock markets, the FTSE was up 0.27%, the German DAX closed flat and the French CAC 40 Index lost 0.08%. U.S. stocks closed in mixed territory Friday. The S&P 500 fell by 0.05% to 2010. The Dow 30 gained 0.08% to 17279, while the NASDAQ Composite Index was down 0.3% to 4580.
Today is fairly light on data releases. ECB President Draghi’s speech will be the only noticeable event. Flash PMI’s will be released from Tuesday.
Have a great trading day!
Anthony
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