Pound (GBP) Exchange Rates Prove Resilient Despite Carillion Collapse and Drop in UK Inflation
Pound (GBP) exchange rates posted a mixed performance on Tuesday, rising against the Euro (EUR) and some of the commodity currencies, but sliding in early trading against the US Dollar (USD).
With markets still digesting the ramifications and severity of UK construction giant Carillion’s liquidation, the Pound’s performance could be interpreted as a measure of resilience.
Regarding the collapse, the UK government announced that firms working for Carillion on private sector contracts will receive only two days of support money. The wider consequences of this remain unknown but are likely to be significant when considering that Carillion owed money to an estimated 30,000 firms.
The collapse could potentially threaten thousands of UK jobs and small firms, in turn affecting the performance of the Pound.
In other news the UK’s December inflation figures have been released, with the Office for National Statistics (ONS) revealing the British annual core inflation rate (which excludes energy and food) has fallen from 2.7%, to 2.5%. This was below the market forecast of a drop to 2.6%.
Whilst this bodes well for consumers, investors were disappointed as it could reduce the likelihood of tighter monetary policy measures in 2018.
GBP/EUR Exchange Rate Extends Narrow Lead as German Inflation Holds Steady
The Pound Euro (GBP/EUR) exchange rate extended its narrow lead into Tuesday on news that consumer prices in Germany held steady over the December period.
According to data from Destatis, price rises in Germany stood at 1.7% year-on-year, unrevised from the previous estimate but down from the previous month’s 1.8% print.
This was predominantly due to a slight drop in energy inflation, although the monthly cost of food and services rose at a faster pace.
Although this represents only a slight deviation from market expectations, the poor reading does not bode well for the bloc considering the current dovishness of the European Central Bank (ECB).
The Euro’s current weakness could also be attributed to the US Dollar (USD) siphoning market demand during its latest rally.
GBP/USD Exchange Rate Pares Recent Gains on Latest US Dollar Surge
The Pound US Dollar (GBP/USD) exchange rate pared some of its recent gains on Tuesday morning as the ‘Greenback’ capitalised on the fresh weakness of the Euro (EUR).
With very little on the data calendar the US markets are predominantly focused on Germany’s poor inflation print and political woes, and investors are unsettled by news that the ‘grand coalition’ is still nowhere near becoming a reality.
Looking ahead, markets will be interested in this evening’s release of the US consumer inflation expectation readings. Other events for Wednesday include industrial and manufacturing production figures and speeches from three notable US Fed policymakers.
GBP/CAD Exchange Rate Slides on BoC Rate Hike Hopes and Crude Oil Surge
The Pound Canadian Dollar (GBP/CAD) exchange rate tumbled on Tuesday, restrained by market expectations of a rate hike on Wednesday by the Bank of Canada (BoC).
Analysts are expecting the central bank to kick off 2018 by hiking interest rates 25 basis points, putting the benchmark borrowing cost at 1.25%.
This would come in the wake of robust jobs figures and growing optimism about the Canadian economy.
In other news, Brent crude oil maintained prices of around 70 US Dollars, a level unseen since before 2014’s massive slump.
This underlined the continued success in production cut efforts by OPEC nations and continued to bolster demand for the Canadian Dollar.
GBP/AUD Exchange Rate Trades within Narrow Band Ahead of AUD Consumer Confidence Readings
The GBP/AUD exchange rate was trading within a relatively narrow band on Tuesday, boosted by Monday’s poor Australian TD-MI inflation gauge reading. Movement was limited by fluctuations in the US Dollar (USD) and the UK’s problems following the liquidation of construction giant Carillion.
In other news, Australian new motor vehicle sales soared in December from 2.2% year-on-year to a whopping 6.7%; a less significant ecostat perhaps but positive nonetheless.
Looking ahead, markets will be keen to assess tomorrow’s Westpac consumer confidence change figures for January, with a drop expected from 103.3 to 102.
GBP/NZD Exchange Rate Crawls Ahead on Drop in New Zealand Business Confidence
Business confidence in New Zealand took a turn towards the pessimistic in December, with the formation of a Labour led coalition government continuing to cause apprehension amongst NZ businesses.
The New Zealand Institute of Economic Research revealed a -12% drop in business confidence in Q4 2017, down significantly from the previous period’s 5% score and the forecast of 2%.
This prompted a small climb in the GBP/NZD exchange rate, with markets shifting away from the riskier currencies in light of the current US Dollar (USD) strength.