Cricket vs currencies at the World Cup
As has already been noted, Ashes victories for England or Australia can have a marked effect on the financial markets in either country, as euphoria adds to risk appetite among investors.
But is this effect repeated on the biggest stage, the Cricket World Cup currently taking place in Australia and New Zealand? Examining the indices of each country involved can be tough, but luckily finding out about forex trading after each match can give an insight into whether traders are buoyed by a sudden upturn in patriotic feeling.
Australia, the joint-hosts and favourites to take the trophy, got off to a great start by hammering their great rivals England by 111 runs on Valentine’s Day. And Australian traders appear to have taken their optimism about the World Cup onto the forex markets: the Australian dollar increased an impressive 0.8% – or 32 points – against the pound in the following 24 hours of trading.
At first, it looked like Australia’s index, the ASX, was about to go the same way. It also climbed some 30 points early in trading on Monday; but that was only after a swift drop beforehand and no real growth was seen after.
New Zealand will also have hopes of lifting the trophy on home soil, which were bolstered after strong opening wins against Sri Lanka and Scotland in the first few days of the tournament. Like in Australia, those wins may have contributed to the New Zealand dollar’s current bull run against the pound. The NZD moved up almost 1% against the pound in the first few days of the tournament, despite most of 2015 seeing the pound in the ascendancy.
Away from the tournament’s hosts, it is perhaps India who will be most pleased with their performance so far. They were a little unfancied coming into the tournament – the defending champions are most bookie’s fourth favourites, after Australia, South Africa and New Zealand.
That was mainly due to injuries and some poor form in the run up to the competition. Which is not the situation a cricket-obsessed nation wanted to be in as it prepared to face its arch-rival, Pakistan, in a match watched by over a billion people around the world. India shrugged off the pressure for a solid 76 point win: their fifth straight World Cup victory against Pakistan, and the first to include a century.
From 8am–5pm on the Monday after the match, the Indian rupee gained almost 50 points against the pound. India celebrated an extremely positive start to the tournament in style, and its currency didn’t rain on the parade.
Finally among the tournament favourites, South Africa overcame a shaky start to complete a barnstorming win against Zimbabwe. That match included a new record one-day international fifth wicket stand of 256 from South African duo David Miller and JP Duminy. Whether that remarkable partnership can help South Africa to a first ever World Cup remains unknown, but South Africa have plenty to celebrate as the rand moved up an impressive 184 points against the pound in the first few days of the tournament.
One continuing theme of all of this has been some strong moves against the pound: perhaps unsurprising given England and Scotland’s travails at the hands of Australia and New Zealand so far. If the trend of upward forex moves after victories continues beyond the first few matches, traders in the United Kingdom will be hoping that the home nations pick up their performances a little.