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Pound Sterling Exchange Rates Rise on Optimism over UK Government Stability

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Pound Sterling: GBP Bounces Back on Low Odds of Leadership Challenge

The Pound has been volatile over the past 24 hours, initially declining against the Euro and US Dollar on Monday before staging a recovery today.

These fluctuations were caused by the resignation of Brexit Secretary David Davis and Foreign Secretary Boris Johnson.

Mr Johnson’s departure caused an immediate GBP decline, but the currency has since recovered on trader confidence that there won’t be a leadership challenge.

Some optimistic analysts are even predicting a more stable UK government after the two departures, but for the time being GBP is rising due to lessened expectations of further near-term disruption.

Looking ahead, the Pound could make greater gains on Friday if Bank of England (BoE) policymaker Jon Cunliffe speaks in favour of a near-term interest rate hike.

Euro: EUR/GBP Exchange Rate Declines on Cautious ECB Rate Hike Plans

The Euro has slipped against the Pound and US Dollar today, in addition to trading in a narrow range against other currency peers.

This limited movement follows Monday’s comments from European Central Bank (ECB) President Mario Draghi, who discussed future adjustments to monetary policy.

Although Mr Draghi indicated that higher interest rates were likely in 2019, he stressed that any adjustments wouldn’t come until the middle of the year and that ’caution’ was still the ECB’s watchword.

The Euro’s current losses could grow on Wednesday, if the day’s speeches from ECB policymakers bring more cautious statements on monetary policy.

US Dollar: USD Strengthens despite Trade War Fears

Having traded poorly on Tuesday, the US Dollar has appreciated today and risen sharply against the Pound and Euro.

This strong performance comes without any clear stimulus and may instead be because other global currencies are seen as riskier options for trade.

This afternoon and Wednesday afternoon will bring data covering changes to crude oil stocks within the US.

If both readings show falling oil reserves then the US Dollar could appreciate. Lower stocks of crude oil might lead to higher oil prices for US exporters, thereby benefitting them.

Australian Dollar: AUD Drops on Lower Australian Business Confidence

The Australian Dollar has made a minor loss against the Euro today, while also making larger declines against the US Dollar and Pound.

This poor performance follows the news that the NAB business confidence reading for June has declined from 7 points in April to 6 points in May.

Any reading above 0 means that more businesses are optimistic rather than pessimistic, but this has still been an uninspiring data release.

Additional Australian Dollar losses may be incoming on Wednesday morning, when the Westpac consumer confidence index for July is due for release.

If this shows a dip in sentiment levels as forecast, then the combined effect of such a result and today’s NAB data could drag the AUD down.

New Zealand Dollar: NZD Demand Drops on Stronger US Dollar

The New Zealand Dollar has fallen against most of its peers today, mainly because a stronger US Dollar is lowering risk sentiment among currency traders.

The New Zealand Dollar could regain lost ground on Thursday evening if the business NZ PMI shows manufacturing sector growth in June, as some economists suspect.

Canadian Dollar: CAD Trading Mixed ahead of Potential BoC Interest Rate Hike

The Canadian Dollar has fallen against the Pound and US Dollar today, but posted moderate gains against the Australian Dollar, New Zealand Dollar and Euro.

This varied performance is down to trader uncertainty ahead of Wednesday’s Bank of Canada (BoC) interest rate decision, which may bring a CAD-boosting rate hike.

The current worry is that while likely, a rate hike on Wednesday is not guaranteed so could lead to a CAD-damaging interest rate freeze.

 

Further Reading

 

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Australia Cuts Interest Rates to Record Low

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Last update: 7 Jan, 2020

  

Posted to: News

 
 
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.
 

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