Pound (GBP) Exchange Rates Surge as Markets Lose Risk Appetite
The Pound (GBP) rallied against the major commodity currencies on Friday as markets prepared for the imminent release of the US inflation figures – big data that could cause volatility across the board.
Today will not be featuring any data directly pertaining to the United Kingdom, however, with markets largely left to continue digesting Thursday’s gloomy Brexit impact assessment report by Cambridge Econometrics, and recent mixed remarks from Bank of England (BoE) policymakers.
Looking ahead, next Tuesday will see the release of the UK’s highly anticipated consumer price index readings for December, as well as the retail price index figures and the producer price index results – with the UK’s inflation results liable to further influence monetary policy in 2018.
Pound Euro (GBP/EUR) Exchange Rate Slides on Hawkish ECB Minutes
Whilst the Pound has rallied against most of the majors, the Pound Euro (GBP/EUR) exchange rate continues to fare poorly in light of the release of the European Central Bank’s (ECB) latest policy meeting minutes.
The single currency soared in response to suggestions that the ECB might alter its forward guidance over the next few months in order to prepare markets for a withdrawal of stimulus later in 2018.
This was, surprisingly, a lot more hawkish than investors had initially expected – news that helped the Euro gain significant ground.
Pound US Dollar (GBP/USD) Exchange Rate Rallies on US Inflation Worries
The Pound US Dollar (GBP/USD) exchange rate rallied on Friday as markets geared up for the release of the highly anticipated US inflation figures.
Currently, the headline December inflation growth rate (year-on-year) is expected to print at 2.2%, in-line with the previous period’s release.
Month-on-month, markets are expecting a print of 0.3%, down from the previous period’s 0.4%.
The US Federal Reserve will be paying close attention to the core inflation rate, however, (excluding food and energy prices), which is currently forecast to print at 1.8% year-on-year, above the previous period’s 1.7% but still below the bank’s inflation target of 2%.
This jump, whilst small, would still be a step in the right direction for the US Fed, and could further cement hopes for three, if not four rate hikes this year.
Crude Oil Prices Slip, Pound Canadian Dollar (GBP/CAD) Exchange Rate Soars
Oil prices slipped from recent highs on Friday, with analysts and traders having warned of a price correction since the start of this year.
Analysts pointed to somewhat weak Chinese December oil data as the culprit, though the market outlook for oil prices continues to remain relatively upbeat in light of OPEC’s progress in curbing global supply.
For this reason the surge in the GBP/CAD exchange rate may prove short-lived, especially if oil prices recover in the near-term.
Australian Dollar (AUD) Exchange Rates Tumble on Fresh Risk Aversion
The Pound Australian Dollar (GBP/AUD) exchange rate clawed back recent losses on Friday, bolstered by fresh investor risk aversion ahead of the US inflation readings.
On the data front, China’s latest import/export figures failed to give the Australian Dollar respite, with year-on-year Chinese imports in December tumbling from 17.7% to a disappointing 4.5%, significantly below the expected consensus of 13%.
Pound New Zealand Dollar (GBP/NZD) Exchange Rate Claws Back Losses
The GBP NZD exchange rate’s seven consecutive days of losses came to an end on Friday with the New Zealand Dollar giving up recent gains on US inflation apprehensions.
Markets are hesitant to invest too heavily into riskier commodity currencies like the New Zealand Dollar when there is any indication that the US Dollar (USD) may soon rally.
Looking ahead, the next significant ecostat for New Zealand will be next week’s bi-weekly global dairy price auction, with Thursday’s New Zealand business manufacturing PMI also liable to affect the GBP NZD exchange rate.