With the Bank of England’s (BoE) latest financial stability report having little impact on currency markets, movement in the Pound (GBP) yesterday was largely driven by its peers.
There were a few points worth focusing on in the BoE’s report however as the bank warned against the rise in consumer credit (which is reportedly at its highest levels since the financial crash) and pushed for banks to ensure they have £11.4bn in extra capital to protect against possible bad loans.
However, Sterling found its legs again earlier this morning, making some gains against the other majors as Nationwide reported that house prices rebounded in June.
The Pound Euro (GBP EUR) exchange rate nosedived yesterday following an unexpectedly hawkish speech by European Central Bank (ECB) President, Mario Draghi.
Markets reacted positively to the speech as Draghi altered some of his language regarding the bank’s stimulus plans, with observers taking it as a hint that the bank may begin winding down its quantitative easing programme later this year.
Meanwhile, the single currency was driven even higher this morning by the release of the France’s latest consumer confidence report as it soared to a new 10-year high.
Sterling was able to climb by around a cent against the US Dollar (USD) yesterday as the IMF downgraded it US growth forecast, with the fund attributing the lowering of its expectations for US GDP to Trump’s lacklustre performance as President.
The ‘Greenback’ was further weakened yesterday as Trump was again blocked from pushing through his new healthcare bill, with markets fearing it reflected poorly on his ability to push through his much anticipated economic reforms.
However, the US Dollar may begin to rally later this afternoon with the release of the latest US home sales data, with pending sales expected to have rebounded strongly in May.
The Pound Canadian Dollar (GBP CAD) exchange rate was met by volatility on Tuesday as the ‘Loonie’ fluctuated in line with crude oil prices, which yo-yoed over concerns that an unexpected increase in US stockpiles will create more global surplus.
The Pound Australian Dollar (GBP AUD) exchange rate surged by over a cent on Tuesday as market risk appetite dried up, causing investors to flee from the high-yield ‘Aussie’.
New Zealand Dollar
It was a similar story for Sterling against the New Zealand Dollar (NZD) yesterday as the pairing soared following a shift away from riskier assets.
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