Pound (GBP) Exchange Rates Down as UK Inflation Misses its Mark
The Pound (GBP) stumbled against the majors on Wednesday morning, encumbered by a below-forecast fall in UK consumer price inflation.
According to the Office for National Statistics (ONS), inflation in the UK fell from 2.5% to 2.4% year-on-year, marking a fresh one-year low and compounding fears that the Bank of England (BoE) might continue to delay a rate rise until the data improves.
This easing was largely due to falling air fares, although upward pressures did occur in the form of rising petrol prices.
Looking ahead, investors will be interested in seeing if tomorrow’s April retail sales print reflects a similar downtrend for the second quarter.
GBP/EUR Exchange Rate Flounders – Eurozone Q2 Growth Disappoints
The Pound Euro (GBP/EUR) exchange rate traded lower this morning, even with the bloc’s disappointing Markit purchasing managers’ index (PMI) results ringing some alarm bells.
Markit revealed that the services and manufacturing sectors proved sluggish in May, with the preliminary estimate composite reading printing at 54.1, down from 55.1
This underscored fears that the bloc’s economic slowdown in Q1 might not have been simply a blip, whilst also reducing the possibility that the European Central Bank (ECB) will taper down its quantitative easing measures before the end of the year.
The Euro quickly came under pressure as a result, but it was not enough to prevent GBP/EUR from falling.
US Dollar (USD) Exchange Rate Rally Endures – US FED Minutes Ahead
The US Dollar (USD) resumed its rally on Wednesday, unperturbed by news that US President Donald Trump has tempered expectations for progress in US-China trade negotiations.
‘There is no deal,’ the US President said late on Tuesday, rejecting suggestions that the two nations were on the cusp of an agreement.
Instead, investors were far more preoccupied with the current strength of US bond yields, and the highly likely possibility that today’s Federal Open Market Committee (FOMC) minutes will prove hawkish.
This kept GBP/USD on a very poor footing.
GBP/CAD Exchange Rate Flounders – NAFTA Talks Liable to Continue into 2019
The Pound Canadian Dollar (GBP/CAD) exchange rate traded lower this morning thanks to the UK’s disappointing inflation results, but anxieties continue to mount over the Canadian Dollar with the state of NAFTA negotiations.
The Mexican Institute of Financial Executives (IMEF) announced on Tuesday that the renegotiation of the agreement could last well into next year, with the US and Mexico apparently lacking the time to conclude discussions on complex issues before the looming political changes.
This is bad news for Canada and the ‘Loonie’, as the absence of a successfully secured NAFTA deal could have expensive implications for their economy.
Crude oil prices are slightly down today, but still remain substantially high.
Pound Australian Dollar (GBP/AUD) Exchange Rate Slides – RBA’s Lowe Points to Threat of China Debt
Reserve Bank of Australia (RBA) Governor Philip Lowe had a few cautious remarks this morning, asserting that the build-up of debt and bad loans in China is one of the biggest risks facing the Australian economy.
Indeed, if something does go wrong in China then we could see the ‘Aussie’ Dollar encounter massive turbulence – with China not only being Australia’s primary destination for iron ore and coal, but also their largest importer of a range of food and services.
In other news, however, the Westpac leading index scored higher in April month-on-month, recovering from the previous -0.13% print by rising to 0.19%.
This helped keep GBP/AUD in the ‘Aussie’ Dollar’s favour.
GBP/NZD Exchange Rate Falls – NZ Trade Balance Looms
Sterling traded lower against the New Zealand Dollar (GBP/NZD) today, although many investors are slightly skittish that the US-China trade negotiations – and indeed the situation in North Korea – might deteriorate.
If this does occur then riskier commodity currencies like the ‘Kiwi’ Dollar will pare their recent gains, potentially sending GBP/NZD higher.
Looking ahead, today will feature the New Zealand trade balance figures (due tonight).
If the expected surge in surplus does indeed occur then we could see GBP/NZD fall even further.
This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.
Last update: 22 Feb, 2020
The strong start to the year for “risk-on” currencies is already a distant memory.
Posted: 3 Feb, 2020
The threat of a proxy war between the US and Iran in Iraq has pared back some of the recent gains of “risk-on” currencies.
Last update: 8 Jan, 2020