The Pound (GBP) plummeted across the board yesterday as the Bank of England (BoE) voted 6-2 to leave interest rates unchanged at its August meeting.
Sterling sentiment was further undermined by the bank’s decision to lower its growth forecast for 2017, with the BoE now expecting the UK economy to expand 1.7%, down from a previous forecast of 1.9% in May.
This was compounded further by Mark Carney’s non-committal answer on the possibility of future rate hikes, with the BoE Governor only saying that rates may rise ‘faster than the markets expect, but slower than in a traditional cycle.’
The Pound Euro (GBP EUR) exchange rate nosedived yesterday, sliding by almost two cents as markets were disappointed by the dovish tone of the BoE meeting.
The single currency also recorded some gains yesterday on the back of upbeat retail sales as sales grew 0.5% in June, up from 0.4% the month before.
Meanwhile, the Euro was also strengthened this morning as Germany’s factory orders expanded 1.0% in June, outpacing forecasts that they would only rise by 0.5%.
Sterling slumped from an eight-month high against the US Dollar (USD) on Thursday in response to the Bank of England’s decision to leave interest rates on hold.
The negative sentiment surrounding the decision also prevented the ‘Greenback’ from posting any major losses yesterday afternoon despite the latest US Non-Manufacturing PMI tumbling from 57.4 to 53.9 in July.
However the US Dollar may be forced to relinquish some of its recent gains later today as the US releases July’s employment figures, with economists forecasting that Non-Farm Payrolls will have slid from 222,000 to 183,000 last month.
The Pound Canadian Dollar (GBP CAD) exchange rate tumbled by over a cent yesterday as markets fear that a BoE rate hike may still be some way off.
The ‘Loonie’ may stumble this afternoon however as Canada releases a string of economic data, with an expected fall in both employment and the nation’s Business PMI likely to pressure CAD.
Almost all of Sterling’s gains against the Australian Dollar (AUD) this week vanished in the last 24 hours in the wake of the BoE’s gloomy outlook and better than expected Australian retail sales data in Thursday’s overnight session.
New Zealand Dollar
The Pound New Zealand Dollar (GBP NZD) exchange rate fell by around two cents on Thursday, with markets fearing that a potential rate hike from the BoE is now looking further away after the MPC voted 6-2 to leave monetary policy unchanged.
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
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