Super Thursday is here, so what did it do for Pound (GBP) Exchange Rates?
The BoE rate decision is here!
Unsurprisingly the central bank left interest rates on hold at 0.50%, but they also made a few highly significant hawkish adjustments to their accompanying statement, arguing that an earlier than expected rate hike might be warranted if UK’s economy continues to evolve as projected.
Beyond this, the bank updated its growth forecasts for 2018/19, with 1.8% growth now expected in 2018 (up from 1.6%).
This news rocketed Pound (GBP) exchange rates to fresh highs.
Bank Governor Mark Carney and the financial services company UBS have both in the past asserted that a rate increase in May would be highly dependent on progress being made in Brexit transition talks, however, with a break in the deadlock liable to provide clarity, encourage investment and hopefully bolster the UK’s economy.
GBP/EUR Exchange Rates Remain Narrow amid German Trade Balance and ECB Economic Bulletin
The Pound Euro (GBP/EUR) exchange rate remained within a narrow band on Thursday morning, limited by the looming BoE rate decision and a relatively upbeat European Central Bank (ECB) economic bulletin, but seeing small gains on a disappointing German trade surplus reading.
The German trade surplus dropped to EUR 18.2bn in December, down from the previous period’s EUR 23.7bn and the market forecast of EUR 19.5bn.
This result was driven by a 3.9% rise in exports and a 5.0% rise in imports – the first fall in Germany’s trade surplus since 2009.
Whilst some might consider this to be the beginning of something larger, the surplus reading still remains high, with some economists repeatedly urging Germany to boost imports and increase domestic spending.
International Monetary Fund (IMF) Chief Christine Lagarde thinks so too, pointing to Germany’s large trade surplus with other nations as being partially responsible for a rise in global protectionism.
In other news the anticipated ECB economic bulletin was released this morning, a report that focused on how certain demographics of workers have bolstered Eurozone labour supply growth.
The assessment also acknowledged that the labour supply is expected to decline in the future due to an aging population, however.
GBP/USD Exchange Rate Slips amid Comments from US Fed Williams
The Pound US Dollar (GBP/USD) exchange rate fluctuated on Thursday morning following comments from hawkish San Francisco Fed President John Williams.
Speaking at the Milken Institute Global Conference in California, Williams asserted that the Federal Reserve will stick to its plan for ‘steady, gradual’ interest rate increases, also moving to dispel the idea that the Fed might ‘overreact or somehow undermine’ good news for the US economy.
‘The economy clearly can handle gradually rising interest rates,’ he stated. ‘I’m not really worried about the downside risks of the economy slowing too much.’
This even-handed outlook did little to help or hinder the ‘Greenback’, though the reinforcement that the Fed will likely be sticking to its plans for steady, gradual interest rate rises in 2018 helped to keep the US Dollar on good form.
Looking ahead, the GBP/USD exchange rate will largely be driven by the BoE’s rate decision, though upcoming readings on US jobless claims could push it up or down.
GBP/CAD Exchange Rate Inches Ahead as Crude oil Prices Plummet
The Pound Canadian Dollar (GBP/CAD) exchange rate climbed on Thursday morning, capitalising on a large drop in the price of Canada’s primary export; crude oil.
Oil prices fell after US government data revealed that US crude and fuel stockpiles actually rose last week, contradicting a previous report that suggested that inventories had fallen.
The report pointed to a 1.9m barrel rise in US stockpiles whilst also demonstrating a record high in production.
This knocked WTI crude futures down 2.5% and Brent some 2%, with markets seemingly losing faith that OPEC will be capable of curbing the global supply glut.
GBP/AUD Exchange Rate Climbs as RBA Lowe Makes Dovish Statements
Reserve Bank of Australia (RBA) Governor Philip Lowe has stated that he does not ‘see a strong case’ for a near-term interest rate move, repeating that he is not required to follow the global trend in the withdrawal of stimulus.
‘Our circumstances are a little different. We are still some way from what could be considered full employment and our central scenario for inflation is for it to remain below the mid-point of the medium-term target range for the next couple of years’.
Despite this cautiousness analysts at NAB have asserted that business conditions in Australia are extremely positive, with a +15 rise in their ‘business conditions’ assessment in Q4 2017 – the highest level since early 2008.
This proved ineffective in knocking the GBP/AUD exchange rate out of Sterling’s favour, however.
GBP/NZD Exchange Rate climbs as RBNZ keeps Interest Rates on Hold
The Pound New Zealand Dollar (GBP/NZD) exchange rate climbed on Thursday morning as markets reacted to extremely dovish comments from the Reserve Bank of New Zealand (RBNZ) at their latest monetary policy meeting.
The RBNZ kept interest rates on hold (as widely expected), but the central bank also revisited their forecasts for 2018-19, slashing economic growth predictions from 3.8% to 3.1%, and talking down the possibility of rising consumer prices.
This led Economists at Westpac to prognosticate that a rate hike will likely not occur until May 2019.