RBNZ Leaves Rates Unchanged, CAD Continues Towards 30 Year Highs (page 2 of 2)

Figures for July consumer spending is expected to show a rebound after dropping 0.4 per cent the prior month.

The Canadian dollar has also been in play today. It rallied within 10 pips of its 30 year high against the US dollar. With no economic data released today, the currency pair has been driven higher by the strong move in oil prices.

Euro hits 1.40 to the dollar; will the SNB raise interest rates?

The euro has broken 1.39 and will be on its way to test 1.40. Economic data continues to surprise to the upside with Eurozone industrial production increasing a whopping 0.6 per cent in July.

Labour costs also increased from an upwardly revised 2.3 per cent to 2.5 per cent in the second quarter. It seems that the strength of the euro has had a much more muted affect on exporters than in the past. Perhaps they learned from their mistakes and have hedged far more aggressively than they did in 2005.

The German Chambers of Industry and Commerce said that the US sub-prime crisis has had little impact on the economy and the strength of the euro is not a problem for German exporters. The French on the other hand are complaining that the euro is weighing on growth.

Meanwhile, the Swiss National Bank (SNB) will be announcing their monetary policy decision tomorrow morning. The market is actually expecting an interest rate hike from the SNB. We think there is a strong chance that the SNB will hold given the recent risks in the global markets.

British pound: Slide represents concern about high LIBOR rates

The British pound was the only major currency to weaken against the US dollar today. Economic data was mixed with average earnings increasing more than expected while the drop in claimant was smaller than the market's forecast.

This may be due to the potential consequences of the rise in sterling LIBOR (London Interbank Offered Rate) rates, which are at a nine year high. The UK has its own bubble troubles and a higher LIBOR rate only means higher borrowing costs and mortgage payments.

UK consumers are up to their neck in as much debt as US consumers. Today's price action reflects concerns that the bubble may burst.

Shinzo Abe's resignation matters little to the yen

The surprise resignation by Prime Minister Shinzo Abe has mattered little to Japanese yen traders today since it is weaker against some currencies and stronger against others.

Typically political uncertainty is never good for a country's currency but Abe's weak approval ratings indicate that Japanese citizens want to see change. Whoever takes Abe's place will most likely favour of low interest rates.

Economic growth has been tepid, which is part of the reason why consumers are so unhappy and unless the new Prime Minister wants to have low approval ratings like Abe, generating faster growth will be one of his top priorities.