Pound Sterling (GBP) Exchange Rates Tumble as UK PM Theresa May Faces Showdown from Rebel MPs
The Pound (GBP) is encountering a great deal of pressure on Tuesday, falling to a new seven-month low against the US Dollar (USD) as investors digest a combination of political angst, worsening global trade relations and yesterday’s downbeat British Chambers of Commerce (BCC) growth forecast.
UK Prime Minister Theresa May is currently struggling to get Brexit-related decisions approved by Parliament, with lawmakers in the upper house backing an amendment that would ensure that Parliament receives a ‘meaningful vote’ on a final Brexit deal with the EU.
This essentially underlined fractures within Downing Street, with a lack of influence for minsters raising tensions and postponing the possibility of Sterling making a recovery.
GBP/EUR Exchange Rate Steady as Draghi Reiterates Dovish Sentiment
The Euro (EUR) came under pressure on Tuesday as European Central Bank (ECB) President Mario Draghi reiterated that the bank will be taking its time to lift interest rates.
Speaking at an ECB conference in Sintra, Portugal, Mr Draghi reinforced the sentiment seen in last week’s ECB policy meeting by arguing that the bank must be ‘patient’ in determining the timing of a rate rise.
This news crippled demand for the single currency, with a rate hike from the central bank not expected until after summer 2019.
US Dollar (USD) Exchange Rates Soar, Capitalising on Trade War Concerns
The US Dollar (USD) climbed on Tuesday as traders scrambled to protect themselves from escalating signs of a trade war.
This might seem counter-intuitive at first glance, but the tariff exchanges between the US and China could potentially drive US inflation higher, forcing interest rate rises and making the Dollar a higher-yielding asset.
Looking ahead, investors will be keeping a close eye on China’s response to the Trump administration’s latest threat of additional tariffs targeting $200bn of Chinese goods.
If these escalations continue then we could see the ‘Buck’ rise even higher amongst the majors.
Canadian Dollar (CAD) Exchange Rates Encumbered by Falling Oil Prices and Worsening Trade
The Canadian Dollar (CAD) continued to encounter pressure on Tuesday, creeping higher against the Pound but falling against most of the majors due to weakening crude oil prices and worsening trade relations with the US.
Investors continue to regard NAFTA negotiations as hopeless, with trade relations between the US and Canada – particularly regarding Canada’s dairy supply management system – leaving both nations at a deadlock.
Australian Dollar (AUD) Exchange Rates DOWN as Markets Gripped by Risk Aversion
The Australian Dollar (AUD) tumbled on Tuesday as investors responded to the omission of a significant line from the Reserve Bank of Australia’s (RBA) June meeting minutes.
The bank had removed the line that asserted the next rate decision will most likely be up, rather than down, leaving many to suspect that policymakers at the central bank are now unsure that the Australian economy could handle a rate hike in the near future.
In other news, market risk appetite has markedly decreased due to the US tariff war with China – two of Australia’s primary export markets.
Combined, this crippled demand for the ‘Aussie’ Dollar.
GBP/NZD Exchange Rate Down – NZD Investors Await Diary Auction Results
The Pound fell against the New Zealand Dollar (GBP/NZD) on Tuesday, failing to capitalise on global trade concerns and floundering in light of the latest political turmoil.
Investors are currently waiting with bated breath for the global dairy trade auction results, with a rise in dairy (New Zealand’s primary export) prices liable to give the ‘Kiwi’ Dollar a notable boost.
Conversely; falling prices could give GBP/NZD the room it needs to climb.
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