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Forex market news from around the web - 02 October 2014

Forex Report Talking Points

  • Dollar Breaks Pace on the Same Day Risk Slumps
  • Euro Can Reverse Course, Rally if ECB Comes Up Short
  • Japanese Yen: USDJPY Biggest Drop in 6 Months a Signal?
  • British Pound Slips as Manufacturing Weakens, BoE Member Enters Currency Debate
  • Australian Dollar: Not a Good Time to Mount a Recovery
  • Emerging Markets Collapse Further on Heavy Volume
  • Gold In a Breakout Pattern but Can Risk Trends, ECB Deliver?

DailyFX - Daily Fundamentals

Talking Points:

- Dollar Breaks Pace on the Same Day Risk Slumps
- Euro Can Reverse Course, Rally if ECB Comes Up Short
- Japanese Yen: USDJPY Biggest Drop in 6 Months a Signal?

Dollar Breaks Pace on the Same Day Risk Slumps

It is unusual that on a day where risk aversion is prominent enough that it drives global equities lower and leverages volatility across asset classes that the safe haven Dollar would end the day lower. Yet, the greenback has pushed its run so far that a breather is necessary. That is especially true when there is key event risk ahead. Taking stock of the situation, the currency has already pressed its position. Following its best quarter in six years, matching its longest series of daily gains (7) in the same period and still projecting its longest string of weekly gains (11) on record; the Dollar move is mature. Concerns over its persistence leads to indecision as major event risk approaches. The ECB’s rate decision calls a critical contrast to the Fed’s hawkish shift and Friday ‘s NFPs will further shape rate forecasts. In fact, through Wednesday, the USD was up against most counterparts as traders braced themselves for what lies ahead. Yet, the broader downshift in speculative positioning generated more heat for Yen crosses and thereby USDJPY. This outsized move overshadowed the indecision elsewhere.

Euro Can Reverse Course, Rally if ECB Comes Up Short

In the past 5 months, EURUSD has dropped over 1,400 pips from peak to trough. And, much of this move can be attributed to the ECB. As the exchange rate advanced towards 1.4000 and the market showed little sign of relenting under natural market conditions, the central bank moved in to curb the tide. At first President Mario Draghi’s interest in the exchange rate was obtuse with a few offhand comments about its high level. That concern, however, quickly progressed into action when the official linked monetary policy to the currency’s level. Since the link was made, the Euro has been in retreat. With an aim to ease the Euro’s influence on deflation and to help stimulus growth, the group further escalated its effort by lowering rates in June and August (pushing the deposit rate to negative), introducing targeted LTRO loans, halting sterilization of bonds they already held and a range of additional moves. However, on a playing field where other central banks are employing QE (quantitative easing), the market’s real interest was in the ECB’s vow to start an asset purchase program.

At last month’s meeting, Draghi finally confirmed what speculators had expected for months – that they would adopt a stimulus program. He stated that details for the effort would come ‘after the October meeting’. As such, the market is focused on today’s policy gathering in anticipation of a QE course that stands up to what the Fed and BoJ have themselves offered. And, expectations are high. With Draghi already setting out an objective to increase the balance sheet back up to the level it was at in early 2012 (an increase anywhere between €600 billion and €1 trillion), traders have projected a massive effort. Could their expectations be set too high? Given the hefty depreciation of the currency leading up to the event, it is far easier to ‘disappoint’ than it is to ‘impress’. That could turn the Euro and swamp capital markets.

Japanese Yen: USDJPY Biggest Drop in 6 Months a Signal?

Notable changes in key fundamental outlets for the Yen crosses are starting to catch up to the market. We have seen exchange rates long ago diverge from underlying yield expectations for these once-prominent carry trades and the Bank of Japan back away from an upgrade to its stimulus efforts. More recently, the government and business groups have started to up the ante by suggesting the currency’s rapid depreciation was causing economic imbalance. However, these are all ‘passive’ motivators. They remove impetus for further advance for USDJPY and its counterparts. The impetus for an actual change in direction comes from risk trends. With this past session’s Nikkei 225 drop leading global capital markets, the tide recedes and exposes these expensive carry trades. The question is whether risk aversion is here to stay.

British Pound Slips as Manufacturing Weakens, BoE Member Enters Currency Debate

As the focus for the British Pound shifts back to the outlook for interest rate policy, event risk has set an unfavorable tone. This past session, the September manufacturing PMI eased further to a 17-month low, significantly moderating the economic outlook which has been instrumental in bringing forward expectations for the BoE’s first rate hike. Another concern was BoE member Kristin Forbes’ suggestion that the currency’s level could be masking inflation. She was careful not to insinuate a fair value for the Pound, but a market hypersensitive to this read into it.

Australian Dollar: Not a Good Time to Mount a Recovery

Both the Australian and New Zealand Dollars have pushed for a rebound through early morning trade Thursday. After their respective declines these past weeks, it seems like a correction could be easily facilitated by speculative interests. However, sentiment bearings may be exactly why a rebound effort may be an exceptional risk. If risk aversion is at hand, these carry trades are not in good standing.

Emerging Markets Collapse Further on Heavy Volume

With a drop in global equities, it is not surprising to see riskier Emerging Markets suffering. The MSCI ETF dropped another 2.1 percent this past session to six-month lows on the heaviest volume (109 million shares) since April 15. Amongst the worst-hit currencies, the Ruble cooled its heels with only a 0.2 percent drop (despite capital control speculation). It was the Brazilian Real that was headlining a 1.4 percent drop.

Gold In a Breakout Pattern but Can Risk Trends, ECB Deliver?

We find gold once again wedged between tight technical congestion and heavy, impending event risk. That is the kind of combination that often ends in breaks. One of the metal’s key roles is a viable counterpart to traditional fiat that is distorted by monetary policy. A large stimulus program for the ECB could make gold look appealing. Then again, the dollar has been a ready siphon for outflows for other currencies.

Author: John Kicklighter


US Dollar (USD)

Dollar tumbles from six-year high vs yen as U.S. yields slide

The dollar dropped from six-year highs against the yen on Wednesday, weighed down by a fall in U.S. Treasury debt yields amid weakness in global stocks.

Investors also booked profits on long U.S. dollar positions ahead of key event risks such as the European Central Bank's monetary policy meeting on Thursday and Friday's U.S. nonfarm payrolls report.

Still, the dollar is expected to sustain its strength for the rest of the year as investors bet that robust U.S. economic data will lead the Federal Reserve to tighten monetary policy.

U.S. economic reports on Wednesday were mixed. A private sector employment report showed the U.S. economy added more than 200,000 jobs last month but that was offset by weaker-than-expected U.S. manufacturing data.

The Institute for Supply Management said its index of national factory activity dropped to 56.6 last month, its lowest since June, from 59.0 in August. Economists had forecast it would slide to 58.5. A gauge of new orders fell to 60.0 from 66.7.

"The dollar's moves today are positioning-driven because the selling in the dollar came after the positive jobs number," said Greg Moore, senior currency strategist, at RBC Capital Markets in Toronto.

"There's no reason for the market to sell the dollar like that unless it's positioning ahead of the U.S. nonfarm payrolls number."

In late New York trading, the dollar was down 0.3 percent at 109.23 yen JPY=, having risen past 110 yen during Asian trade.

The dollar index .DXY was flat at 85.949. The index has risen 7.4 percent so far this year, and is on track for its biggest yearly gain in nine years.

The greenback's weakness coincided with the fall in U.S. Treasury yields. Both U.S. 10-year note US10YT=RR and 30-year bond yields US30YT=RR fell to one-month lows.

"Obviously, there has been some profit-taking on long dollar positions," said Vassili Serebriakov, currency strategist at BNP Paribas in New York. "Beyond that, I don't think anybody has changed their mind on the bullish dollar trend."

The euro, meanwhile, was down 0.2 percent at $1.2611 EUR=, holding near two-year lows hit on Tuesday. The euro zone's common currency was hit by fresh evidence of a slowdown in inflation in the area.

Data showed euro zone annual inflation cooled to 0.3 percent in September from 0.4 percent, intensifying the case for the ECB to offer more stimulus, including quantitative easing.

That stoked the view that monetary policies in Europe and the United States are diverging. While the Fed is expected to tighten at some point, there is a growing view that the ECB will need to implement a full-blown policy of government bond-buying to fend off the threat of deflation.

Author: Gertrude Chavez-Dreyfuss

Dollar rally exhausted?

On Wednesday, the interconnection between markets was again not easy to understand. Despite conflicting signals from other markets, the USD was apparently ripe an exhaustion move. Of late, the dollar had an overall green light and cleared several important resistance levels. The sky was the limit.
Yesterday, the unidirectional USD positioning finally took its toll. A global risk-off sentiment and a weaker than expected US manufacturing ISM provided ammunition for a USD correction. USD/JPY took the lead in the correction, but finally the dollar ceded ground across the board. USD/JPY had filled bids north of 110 early in the session, but closed the day below 109. EUR/USD was little changed in the 1.2625 area.

Overnight, the dollar remains in the defensive. Most Asian equities are in the red (China is still closed). Japan is underperforming, with USD/JPY drifting further south. The risk-off modus and the decline in core bond yields provides the perfect excuse for a correction on the dollar across the board. It is understandable to see such a risk-off USD decline in USD/JPY or EUR/USD, but the dollar is also losing ground against the likes of the Aussie and the Kiwi dollar. It looks like some repositioning was needed in a market that is too long dollar.

Later today, the calendar of eco data is only moderately interesting. The EMU PPI is expected to decline further, but the case of too low inflation was already made by the CPI earlier this week. In the US, we don’t expect the jobless claims and the factory orders to have much impact ahead of tomorrow’s payrolls.
The ECB policy meeting will be the key. The ECB will leave its policy rates unchanged, but will give more details on the programme of ABS and covered bond purchases. We assume that the (currency) market already anticipates much more ECB easing than this ABS/covered bond programme. So, the focus for currency trading will be on the Draghi’s assessment of the recent low inflation data. How big is the chance that fighting too low inflation will lead to outright QE (government bond buying) in a not that distant future. President Draghi will keep this door (all options) open, but we doubt that his commitment will be enough for a new euro down-leg right now.

Aside from the ECB meeting, the global context remains important. It’s too early to conclude that we entered a longer risk-off correction. Even so, there are plenty of obstacles (Hong Kong, Ukraine, Ebola, uncertainty on corporate earnings ahead of the earnings season….) that prevents a fast return to a risk-on sentiment. This may hamper a broader rebound of the dollar right now.

Tomorrow’s payrolls can put the US currency again in another context, but for now, we assume that the dollar rally is a bit exhausted and some consolidation/correction is likely. We maintain our LT USD positive bias, but turn more cautious short-term.

From a technical point of view, USD/JPY extended its rally after the break of the 105.44 resistance and now approaches the key 110.66 resistance, amid nervousness of Japanese authorities that the yen weakening is becoming too fast. US eco strength and expectations that the normalization of Fed policy nears supports the dollar. The yen remains on the defensive as markets see a decent chance of more BOJ easing down the road. We have a positive view on USD/JPY. There is no reason to row against the tide, but in the short-term some consolidation/correction is still possible.

The technical picture of EUR/USD deteriorated further after the break below the key 1.2662 support level (Nov 2012 low). A confirmation is still needed as the pair is again near that area this morning. Over the previous days, we indicated that we are a bit surprised by the fast pace of the EUR/USD decline.
The trend is not really questioned. Even so, it might take time for the pair to work through oversold conditions. The 1.2043/1.1877 support is the LT target.

EUR/GBP: no real test of the key 0.7755 level.
On Wednesday, EUR/GBP still hovered in the upper half of the 0.77 big figure. The pair showed some intraday swings after both the EMU PMI’s and the UK PMI were reported below consensus. Cable showed some nervous swings too, due to the poor UK PMI. However, tentative signs of dollar weakness finally put a floor for the pair. At the end of the day EUR/GBP changed hands in the high 0.77 area. So, the key 0.7755 support stays intact for now.

Overnight, BoE’s Forbes said that the effects of sterling on inflation were likely to peak at the end of this year. However, for now there is no noticeable sterling reaction to these comments.

Today, UK construction PMI will be published. A limited decline from a high level is expected (63.50 from 64.00). A negative surprise might be a slightly negative for sterling. The BOE decides on monetary policy, but no change is expected.

Of late, the rally of sterling slowed against the dollar and the euro. For now there is no clear enough sign that the BoE will have to raise rates in the first half of next year. This is capping further sterling gains for now.

Short-term, we might see a slowdown in the EUR/GBP decline as the 0.7755 support looms. Further down the road, the focus for sterling trading should return to the economic fundamentals and to the guidance from the BoE on policy normalization. After the recent rebound of sterling and the soft comments from the BoE minutes, investors are pondering the chances for further sterling gains.

Author: KBC Market Research Desk | KBC Bank

Pound Sterling (GBP)

British Pound Slumps Vs Euro, Aus, NZ & US Dollar On Disappointing Manufacturing Data

The British Pound has fallen against the euro, aus and nz dollar exchange rates this morning after recent data showed British manufacturing grew at the slowest rate in 17 months during September.

The Pound to Dollar exchange rate is now resting close to a 2 week low, demand for the USD remains high.

Where does the Pound and Euro place today?

The Pound to Euro exchange rate is -0.11 per cent at 1.28266 GBP/EUR.
The Pound to Dollar exchange rate -0.24 per cent at 1.61764 GBP/USD.

Please Note: these are inter-bank forex rates to which margins are applied when sending money overseas (eg euros, dollars or pounds) - speak to a recommended FX provider to lock in the best foreign exchange rates. Also get free email updates or rate alerts.

The slowdown in manufacturing of this magnitude is likely to be factored into the Bank of England’s thinking when they decide on interest rates next week.

The Pound to Dollar exchange rate dropped to $1.6164 GBP/USD after the data was released from around $1.6198 beforehand; the pair are trading in a downward trend with support around 1.6050 GBP/USD.

The Pound also weakened against the Euro, the move was short lived, Sterling weakened to 77.86 pence per Euro from 77.745 before the data but has now regained to 77.80 as traders shorted the rally.

The FTSE 100 index has continued to fall after Sainsbury’s reported a 2.8% fall in profits, Tesco and Morrisons have also published dismal figures, for the last quarter. The FTSE is now consolidating around the 6,660.08 point level.

The Dollar has rallied to a 6 year high versus the Yen (USD/JPY) and is holding near a two-year peak against the Euro (EUR/USD) earlier today, as investors added to bets that U.S. data will drive the Federal Reserve to raise interest rates.

Commodity currencies such as the Australian/New Zealand Dollars (AUD/NZD) and Canadian Dollar (CAD) have suffered as oil and copper prices continue to drop, Chinese demand for raw materials is falling as their economic growth shows signs of slowing down.

The Australian Dollar was also hit by particularly weak retail sales data.

Market focus is now likely to shift to Friday’s non-farm pay rolls figure for a deeper understanding of when the Fed is likely to act.

Forex market analysts are currently putting the U.S. economy on a recovery path that will allow the Fed to raise interest rates well before the European Central Bank, Bank of Japan and maybe even the Bank of England.

Pound Sterling Exchange Rates Today

The Pound Sterling to Australian Dollar exchange rate is trading down -0.15% at 1.85294 GBP/AUD.
The Pound Sterling to Canadian Dollar exchange rate is trading down -0.54% at 1.80746 GBP/CAD.
The Pound Sterling to Hong Kong Dollar exchange rate is trading down -0.23% at 12.56127 GBP/HKD.
The Pound Sterling to New Zealand Dollar exchange rate is trading down -0.11% at 2.07402 GBP/NZD. - See more at:

Is Pound Euro Rate En-Route to 2008 Highs?

The UK's pound sterling has endured a solid run higher through much of 2014 with late September seeing GBP/EUR hit its stride after a mid-year soft patch.

Indeed, this past week has yielded the best rates of exchange of the year.

As always, those with an interest in the foreign exchange markets will be wondering where the pound to euro exchange rate (GBP/EUR) is headed next.

Analysis continues to point to the probability of further climbs for GBP at the expense of the EUR, but we urge caution on the potential for the EUR to stage strong bounce-backs that could catch markets off-guard.

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Forecasting 2008 Highs to be Achieved

Bill McNamara at Charles Stanley is one analyst who reckons markets could ultimately see levels not seen in 6 years:

"The latest comments by BoE Governor Mark Carney have put the UK currency on interest rate alert and this led to a spike last week against most leading currencies (apart from the dollar).

"The chart shows that sterling is now just marginally below its 2012 peak at 1.285 and it is surely only a matter of time before this level is exceeded and it is back to levels that were last seen in 2008."

Further Pressure on The Euro to be Exerted by the European Central Bank

The ECB is expected by many to provide the fuel to the euro bonfire which is only going to burn brighter in coming months.

However, as always, timing is everything. Don't expect too much too soon:

"The ECB gives policy verdict on Thursday and is expected to maintain the status quo. Despite the escalating speculations for more ECB action, we believe that the ECB will likely wait-and-see the impacts of the recent stimulus," says Ipek Ozkardeskaya at Swissquote Research.

If markets are overly geared for action this could spark a fresh euro rally which will be sharp and could run further than many expect.

Nevertheless, longer-term more stimulus is likely, "the ECB’s balance sheet rebounds above 2 trillion euros through week ended on 26th September, yet there is still a long way to go before the balance sheet gets back to 2012 levels (roughly 3 trillion euros)."

"Mr. Draghi may be obliged to activate a Fed-like QE program (public debt purchasing) if the recent deterioration in inflation expectations continues."

New Zealand Dollar (NZD)

NZ dollar has brief flurry above US 79c

The New Zealand dollar had a brief spurt above 79 US cents as traders took advantage of a short, meaning over-sold, market to push the local currency around after its sustained drop over the past three months.

The local currency rose as high as 79.25 US cents, trading at 78.88 cents at 5pm from 78.01 cents at 8am and 77.77 cents yesterday. The trade-weighted index rose to 76.75 from 76.13 yesterday.

The kiwi dollar has slumped as much as 13 percent from a peak in July as New Zealand's economic growth starts to lose momentum in the face of falling commodity prices for logs and dairy products, two of the country's biggest exports, and as demand for the greenback rallies on heightening anticipation the Federal Reserve will start lifting interest as the world's biggest economy recovers.

"The kiwi has been slammed over the last few weeks and I think this is just traders taking advantage of a short market and knowing they can take it up to some pretty big levels," said Dan Bell, head of corporate sales at HiFX in Auckland. "It's a little bit of a short squeeze - the kiwi is being pushed around by the market."

Traders are waiting for US employment numbers on Friday in Washington for the latest gauge on the US economy, which has supported the greenback against all currencies.

The New Zealand dollar pared gains in Northern Hemisphere trading after dairy prices fell to a five-year low at Fonterra Cooperative Group's GlobalDairyTrade auction overnight Wednesday, with increased stockpiles and the Russian import ban on European Union dairy products adding to reduced Chinese demand.

The ANZ Commodity Price index also showed a drop in prices for locally produced raw materials, its seventh monthly decline.

The kiwi gained to 62.27 euro cents from 61.63 cents yesterday ahead of the European Central Bank meeting, which will likely keep interest rates unchanged. President Mario Draghi's press conference will be watched for any hints the bank plans to add more stimulus to the regional economy.

The local currency slipped to 89.46 Australian cents at 5pm in Wellington from 89.60 cents yesterday, and increased to 85.68 yen from 85.46 yen. It rose to 48.56 British pence from 48.03 pence yesterday.


Australian Dollar (AUD)

Australian dollar lifts sharply as greenback retreats

The Australian dollar was sharply higher on Thursday against its sliding US counterpart, which was sideswiped overnight by data suggesting global economy might be faltering.

Renewed concerns about global economic growth emerged following anemic readings for the manufacturing sector the US and Germany fueled heavy selling on Wall Street overnight.

The US factory sector's expansion slowed a bit in September from its breakneck pace in August, with manufacturers focused on boosting output with only modest hiring.

The Institute for Supply Management said Wednesday its manufacturing index, based on a survey of purchasing managers, slipped to 56.6 last month from an August reading of 59, which had been the highest since March 2011. A figure over 50 indicates expanding activity for the sector.

At 4.50pm AEST, the Australian dollar changed hands at $US0.8788, compared with $US0.8695 late on Wednesday.

The number of Australian home-building permits issued rose in August by 3 per cent from July, government data showed Thursday, in the strongest month-to-month gain since May. Building approvals climbed 14.5 per cent from a year earlier.

Meanwhile, Australia's trade deficit narrowed sharply in August to the smallest since April. The country posted a seasonally adjusted trade deficit of 787 million Australian dollars ($US693 million) in August, compared with a deficit of $A1.08 billion in July.

Currency traders will be closely monitoring comments from European Central Bank President Mario Draghi later Thursday.

"Draghi will need to surpass traders' dovish expectations for the size and scope of the Asset Purchase Program in order to put further pressure on the Euro," said David de Ferranti, market analyst at FXCM.


India Rupee (INR)


The Pound Sterling to Indian Rupee (GBP/INR) exchange rate advanced by more than 0.4% on Wednesday as demand for the Pound was undermined by a disappointing UK Manufacturing PMI report.

However, the US Dollar to Indian Rupee (USD/INR) exchange rate continued trending in the region of a seven-month low as Fed rate bets kept the ‘Greenback’ bolstered and India’s own manufacturing figures fell short.

Yesterday the Reserve Bank of India acted as economists expected and opted to leave interest rates on hold in order to counter the nation’s inflation issues.

The Rupee was able to garner some support from comments issued by RBI Governor Raghuram Rajan. The central bank chief flatly denied rumours that the RBI has been intervening in the currency market to prevent further Rupee depreciations. He stated; ‘In recent weeks, what has been happening is the Dollar has been appreciating against other currencies, therefore when we look at our reserves in Dollar terms, they have been coming down’.

Today’s Indian Manufacturing PMI also pointed to a potential area of concern, with manufacturing sector growth slowing from 52.4 in August to 51.0 in September. A more moderate decline to 51.6 had been anticipated.

Although the report indicated that operating conditions were improving, the sector saw its slowest pace of growth since the close of 2013.

According to HSBC official Frederic Neumann; ‘Manufacturing activity continues to slow amid weaker output and new order flows. Responding to the slowdown, firms lowered purchases and trimmed inventories. On the positive side, the rate of cost inflation decelerated sharply and output prices were unchanged.’

Neumann continued; ‘The central bank is likely to look beyond the near term moderation and keep policy rates elevated so as to reign in entrenched inflation expectations. The RBI would rather see growth recover supported by supply side reforms than through monetary policy stimulus.’


Although Sterling had been bolstered by an upward revision to the UK’s second quarter growth data on Tuesday, the British asset came under considerable pressure on Wednesday after domestic Manufacturing PMI unexpectedly decelerated.

The index fell from 52.2 to 51.6 in September instead of climbing to 52.7 as expected.

The Pound accordingly softened against almost all of its currency counterparts.

The US Dollar to Indian Rupee exchange rate was trending slightly lower ahead of the release of the highly-influential US ISM Manufacturing gauge.

If the report supports the case in favour of a sooner-rather-than-later interest rate increase from the Federal Reserve, the USD/INR exchange rate may rebound before the close of the local session.
Yesterday’s US Consumer Confidence index unexpectedly dropped to a four-month low.

Tomorrow movement in the Pound Sterling to Indian Rupee exchange rate could be caused by the UK’s Markit Construction PMI and the Bank of England’s Financial Policy Committee publishing its statement.

There are no major Indian reports to be aware of.

The direction taken by the USD/INR exchange rate will be dictated by the US jobless and factory orders stats.



The Indian Rupee advanced against both the Pound and US Dollar on Thursday as it took advantage of speculation that the US Dollars recent strong rally has been overdone.

A fall in oil prices also added support to the currency as the value of the commodity fell to its lowest level in 17 months. India is a major importer of the commodity so the decline is likely to improve the nation’s trade balance.

The Rupee was also continuing to take advantage of the weaker than forecast manufacturing PMI data released on Wednesday in both the US and UK.

Author: Josephine Ottaway

South African Rand (ZAR)

South Africa's rand gains traction as weak data hurts dollar

South Africa's rand strengthened against the U.S. dollar on Thursday, extending its gains into a second session as the greenback slid on weaker-than-expected manufacturing activity.

At 0624 GMT the rand was 0.49 percent stronger vs the dollar, its firmest in five days, trading at 11.2055 off a New York close of 11.2650.

The local unit carried over its positive momentum from the previous session, strengthening after the dollar fell against major currencies as the world's largest economy reported that factory activity in September had slowed.

The rand remains vulnerable to further labour tensions after a 280,000-member public servant union announced demands on Wednesday for a 15 percent pay increase, far above inflation.

Africa's most developed economy is still reeling from a six month platinum strike earlier this year.

Earlier this month, central bank Governor Gill Marcus reiterated her concern that recent wage demands and some settlements have not matched inflation and productivity.

Government bonds were flat in morning trade, with yields on the paper due in 2026 unmoved at 8.325 percent.

Author: Mfuneko Toyana

Rand strengthens ahead of ECB meet

The rand was firmer on Thursday morning after taking heart from positive local manufacturing data released on Wednesday.

Market participants will now look to the European Central Bank (ECB) meeting later in the afternoon for further direction.

The ECB was not expected to announce new stimulus measures, but rather to focus on implementing a new, private-asset purchase programme that was part of September’s stimulus package, Dow Jones Newswires reported.

However, the meeting and ECB president Mario Draghi’s press conference will be closely followed for views on ultra-low inflation, the weakening euro and potential for large-scale government bond purchases.

Euro-dollar trading was in a $1.2580-$1.2650 range following the announcement of the interest rate decision, the newswires reported.

At 8.25am the rand was at R11.2101 against the dollar from a Wednesday close of R11.2605.

The currency strengthened to as much as R11.1876 in morning trade.

Against the euro, the rand was at R14.1629 from a previous close of R14.2065 and was at R18.1726 against the pound from R18.2195.

The euro was at $1.2638 from $1.2621 previously.

Barclays Research in an early morning note said the rand brushed off the larger than consensus increase in US ADP employment numbers on Wednesday.

Barclays said the rand had continued to strengthen against the greenback on Thursday morning and the bank believed it could strengthen further if "the tone of ECB president Mario Draghi remains dovish at this afternoon’s ECB meeting".


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