British pound – But trading in the European currencies was also boosted by a series of improvements in service sector readings according to the suite of PMI data on Wednesday. While manufacturing data recently sagged, the service sector is a more important key for most of the developed world. The pound vaulted from within a penny of its lowest in two-weeks against the dollar after the PMI manufacturing reading unexpectedly signaled a faster than forecast expansion within the sector during July. The PMI index of 55.4 marked an unusual jump in activity from the June reading of 53.9 especially in light of other anemic domestic data. The pound nevertheless jumped several hurdles en-route to its session peak of $1.6404.
Aussie dollar – The AiG performance of services in Australia also improved for July but at a reading of 48.8 merely signals lesser contraction than during June. The Aussie swooned following the third decline for retail sales in four months proving a worrisome trend for the central bank concerned by external risks to growth, elevated domestic inflation and a fragile picture of activity outside the rambunctious mining sector. The local currency fell beneath a two-week low reaching $1.0712 before eradicating losses as U.S. stock index futures signaled a rebound. The Aussie was also comforted by a rise in the official Chinese take on the service sector, which rebounded from 57.0 to 59.6. However, the HSBC version indicated further cooling from its June reading of 54.1 to 53.5 last month. The Aussie slipped versus the yen to ¥82.93.
Japanese yen – The Bank of Japan began a two-day meeting and is likely to announce further measures aimed at easing monetary policy on Thursday. Finance Minister Noda warned that any currency intervention would be designed to take “maximum effect”, which possibly hints that when we wake up on Thursday we’ll have heard new measures from Tokyo and seen yen sales. The yen reached ¥76.99 versus the dollar remaining close to there in New York. If the Bank of Japan does step in to restrain the value of the yen, it will become the third central bank this week to do so following similar moves from those of Brazil and Switzerland.
Canadian dollar – A rebound for risk appetite helped distract dealers from targeting commodity sensitive currencies. In a sense the raging fiscal health of the Canadian government has desensitized the currency from the wild swings in risk sentiment over the course of the year. Even though the Canadian economy remains reliant on activity in the world’s leading economy, its currency is becoming something of a safe haven status in its own right. On Wednesday the local dollar advanced to buy $1.0427 U.S. cents.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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