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Good news for those buying Canadian Dollars (CAD$1.62 = GBP£1.00)

20th Aug 2013
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This is what happened on Monday ............................................................................ Yup, absolutely nothing. The lack of data left exchange rates free to put their feet up and relax. That isn’t the pattern for the rest of the week so we shouldn't get used to it and we saw some of that overnight with the release of two pieces of Australasian data.

The Reserve Bank of New Zealand announced that, as from October 1st, no more than 10 percent of home loans could be at a loan to value ratio of more than 80%. This is an interesting measure designed to cool some of the overheating we are seeing in the housing market which is at odds with the rest of the NZ economy. That doesn't address the significant lack of supply of housing stock but it may act to avert a bubble in home related indebtedness. The Kiwi Dollar dropped a couple of cents against the Pound straight after the announcement as investors and analysts assessed the dampening effect this could have on the general economy. 

The other, more expected news was the release of the minutes from the last Reserve Bank of Australia meeting. You'll remember that they dropped the base rate by another 25 basis points at that meeting. Their discussion reveals that further rate cuts could be on the cards although they made it clear that they were not giving an implicit message that they would fall. The Aussie Dollar initially rose on the news and then weakened again as investors moved away from the AUD in fear of a diminishing yield return.

The day continues with very little data from the UK but a few interesting pieces from Europe and the US. European data centres on the producer price indices and construction output. Both have the potential to strengthen the Euro and if the figures are as forecast, that is exactly what should happen but we cannot be certain of anything when it comes to Europe at the moment.

The US data comes in the form of the Chicago Federal Reserve's National Activity Index and the release of the Fed's Redbook, a report which will form part of the agenda for the next Federal Reserve interest rate setting meeting.

In the meantime, Canadian Dollar traders will be most interested in the wholesale sales data which can be market moving. The Canadian Dollar is on a knife edge right now and could fall on either side of the strength/weakness line so this has the potential to be a catalyst for that breakout.
 

Article supplied by David Johnson, Director at Halo Financial - Currency Specialists

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