BoE’s Haskel Takes Mixed Policy Stance – Pound (GBP) Exchange Rates Fluctuate
The Pound (GBP) has posted a mixed performance on Tuesday morning, rising as market anticipation for a Bank of England (BoE) rate rise rose to 70%, but falling later as Johnathan Haskel – Ian McCafferty’s soon-to-be replacement on the Monetary Policy Committee – gave a somewhat cautious speech on bank policy.
Haskel, set to join the team on 1 September, argued that he agrees with the ‘broad direction of travel’ on the BoE’s guidance on interest rates, but that he also sees risks if the central bank raises rates too quickly, and that Brexit uncertainty and productivity levels remain hazards for the economy.
This outlook put a cap on Sterling’s gains.
GBP/EUR Exchange Rate Fluctuates – Investors Prep for EU Council Summit
The Pound Euro (GBP/EUR) exchange rate traded within a narrow band on Tuesday as investors prepared for the looming EU Council summit.
Markets are currently anxious that German Chancellor Angela Merkel’s attempts to cobble together a Europe-wide deal over migrants and asylum seekers will fail, disappointing her coalition partners and raising the chances of her being pushed out of office.
If no deal is reached at the EU summit then it could force her to directly approach Italy and Austria – undermining her leadership and potentially hurting demand for the Euro.
US Dollar (USD) Exchange Rates Soar as Dallas Fed Manufacturing Activity Report Smashes Forecasts
The US Dollar (USD) traded higher against the majors on Tuesday, supported by a raft of upbeat data releases yesterday.
First and foremost; the Dallas Fed’s manufacturing activity report for June scored a whopping 36.5, up from the previous period’s 26.8 and the market expectation of a contraction to 24.9.
Beyond this, the new US home figures made a robust recovery in May, rising from -3.7% to 6.7% – far beyond the forecast 0.8% rise.
Today, investors will be assessing the US Richmond manufacturing report and the June consumer confidence index – which analysts expect to hold strong at a score of 128.
If these readings beat expectations too then we could see the ‘Buck’ continue its surge.
GBP/CAD Exchange Rate Mixed amid Weakening Commodity Prices
The ‘Loonie’ posted a mixed performance today, strengthening against the Euro and the Pound but weakening against the US Dollar and other majors.
The general outlook for the Canadian Dollar remained mostly the same; with the strong performance of its US counterpart and the ongoing failure of NAFTA negotiations siphoning demand away from the ‘Loonie’.
Whilst commodity prices were slightly elevated on Tuesday these ultimately proved insufficient in supporting demand for CAD.
GBP/AUD Exchange Rate down – Australian Dollar Encumbered by Weaker Chinese Yuan
The Australian Dollar climbed against the Euro and the Pound on Tuesday, but was sold off against the other major currencies as investors responded to a weaker Chinese Yuan and a stronger USD.
The Chinese Yuan is generally quite stable, but recent weaker Chinese growth figures and easing monetary policy measures have weighed on the Yuan, dragging the ‘Aussie’ Dollar down with it.
Investors are also still concerned by the escalating trade tensions between the US and China, with any signs of protectionism being anathema for commodity-based currencies.
GBP/NZD Exchange Rate Steady – Investors Prep for New Zealand GDP
The Pound New Zealand Dollar (GBP/NZD) exchange rate traded within a narrow band on Tuesday morning as investors prepared for Tuesday’s New Zealand trade balance readings and the looming Reserve Bank of New Zealand (RBNZ) rate decision.
Analysts currently expect that New Zealand’s trade surplus will shrink from 263m to 100m, and given the recent softening in New Zealand GDP growth and inflation, it seems unlikely that the central bank will move for a rate rise on this occasion.
Combined, this should keep the ‘Kiwi’ Dollar trading lower, especially if the bank proves dovish or overly cautious in their policy statement.
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