Hong Kong Dollar Could Extend Its Recent Gains As US Dollar Is Well-Supported

May 31, 2012 - Written by John Cameron

STORY LINK Hong Kong Dollar Could Extend Its Recent Gains As US Dollar Is Well-Supported

A dismal showing for this afternoon’s US ADP Employment Change figure for May has taken the edge off global risk sentiment. With market participants already fighting shy of riskier asset classes in the early part of the week, due to concerns over Spain’s fiscal position, the disappointing US labour market data this afternoon has heightened fears that tomorrow afternoon’s US Non-Farm Payroll number, traditionally the most closely-watched data release of the month, will also come in below-par. All of this has added up to US Dollar strength on the day, sending the GBP USD exchange rate tumbling into the 1.5300s for the first time since January.

Meanwhile, the Pound has performed poorly on the day, losing ground against all of the other sixteen most-actively traded global currencies. Sterling will be given further direction during tomorrow morning’s European session, with the release of the latest PMI manufacturing survey. Analysts predict that the release will show that activity in this key sector of the UK economy will have contracted in May – if this proves to be the case, then the week could end on a sour note for the Pound.
The move against the euro over the past two months appears to have run out of steam and the single currency has held its ground on the day. Comments from ECB President Mario Draghi earlier, which described the current make-up of the eurozone as ‘unsustainable’, have been relatively well-received by investors holding euro-denominated assets – sometimes a dose of realism can be a positive thing.

Elsewhere, the Hong Kong Dollar has enjoyed a strong showing today, largely thanks to its ongoing loose-pegging with the US Dollar. With Hong Kong’s Hang Seng stock index looking poised to extend its gains of recent times, according to equities analysts at least, the good times could be set to continue for the HKD.

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