The Pound declined sharply on Wednesday as concerns over Scottish Independence climbed. A YouGov poll showed that the lead for the pro-Union campaign has seen a big cut, something that spooked the markets as it puts the referendum result in doubt. The lead for the No campaign was at six points, down from the 14 points measured in the middle of August and the 22 points seen early last month. On Wednesday the Pound recovered slightly on the back of a stronger than forecast Construction PMI report.
The US Dollar was trading close to a one-year high against the Euro and was firmer against the Pound on Wednesday. Investors have raised their bets that the Federal Reserve will increase interest rate earlier than initially expected due to a run of positive domestic data releases. Manufacturing activity in the world’s largest economy surged last month. The ‘Greenback’ could make further gains if Wednesday’s data comes in strongly.
The Euro declined to its lowest level in a year against the US Dollar as strong US data highlighted the diverging strengths of the Eurozone and US economies. The single currency managed to make strong gains against the Pound after concerns over Scottish Independence weighed heavily upon the UK currency. The Euro is likely to give up some of those gains today, as the latest PMI data for the Eurozone may disappoint.
The Australian Dollar rallied on Wednesday to push higher against its major peers after it found support from the release of upbeat economic growth data. Official data showed that Australia’s economy expanded by 0.5% in the second quarter of the year, beating forecasts for a figure of 0.4%. The currency was also finding support from the Reserve Bank of Australia’s decision to leave interest rates at 2.5%.
New Zealand Dollar
The New Zealand Dollar fell against the US Dollar to come close to a six-month low. It also fell against the Pound and Australian Dollar. The cause of the ‘Kiwi’s’ weakness was yesterday’s strong data out of the US. When the US Dollar finds support it is often at the expense of currencies like the New Zealand Dollar. With no New Zealand centric data due this week the currency will continue to see movement from events elsewhere.
The Canadian Dollar softened overnight as investors looked ahead to Wednesday’s Bank of Canada interest rate decision. Economists are widely forecasting that the Central Bank will leave rates unchanged.
South African Rand
The Rand was at its lowest level in a week against the US Dollar and fell against other major peers as disappointing manufacturing data weighed upon the currency and as speculation grows that the US Federal Reserve will raise interest rates sooner than initially expected. The Kagiso PMI, which indicates activity in the manufacturing sector increased by 3.1 points to 49 last month. August marked the fifth month of contracting manufacturing activity as only a reading of above 50 indicates expansion.
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