Pound to Euro Exchange Rate Rallies 60 Pips
The Pound to Euro exchange rate continued to rebound from the eight-month lows struck earlier in the week yesterday, rallying by around 60 pips on the day.
Sterling received a shot in the arm following BoE official Ian McCafferty’s comments, which seemed to signal that he would be voting for higher rates in August. However, market bets for a rate hike next month currently stand at just 14%, down from around 25% last week. The median consensus suggests that policymakers will once again vote 5-3 against tightening policy.
The only major European ecostat of the day showed that German consumer prices remained below target at 1.6% in June. The print had little impact on demand for the single currency.
GBP/USD Strengthens Ahead of US Inflation Print
‘Cable’ strengthened by around half a cent during yesterday’s session as Federal Reserve Chairwoman Janet Yellen’s cautious remarks on the soft US inflation outlook continued to weigh on the ‘Greenback’.
The Pound was lucky to gain against the US Dollar yesterday as the Office for Budget Responsibility released a report into British government finances highlighting the twin threat of another recession and Brexit.
Brutally, the OBR stated that Theresa May’s failure to win a parliamentary majority in June, paired with the supreme level Brexit uncertainty, had made the UK more susceptible to enter crisis mode than it was in 2007 – before the global financial crisis struck.
The damning report had only a minor impact on Sterling, perhaps because the concerns present within the paper have already been priced into Pound exchange rates since the Brexit vote last June and the election last month.
Data due for release this afternoon on the other side of the pond is predicted to show that US consumer prices dropped from 1.9% to 1.7% in June, which could decrease demand for the US Dollar as Fed rate hike bets recede.
Separate reports into retail sales, industrial production and consumer confidence could also buffet the Pound to US Dollar exchange rate.
Pound to Canadian Dollar Exchange Rate Rebounds From 4-Month Low
Profit-taking helped Sterling drift higher by around half a cent yesterday against the Canadian Dollar. Investors profited from the four-month low that GBP/CAD struck on Wednesday, when the Bank of Canada raised interest rates by 25 basis points to 0.75%.
The ‘Loonie’ looks set to register additional gains over the coming months due to the BoC’s shift towards further monetary tightening.
GBP/AUD Loses -50 Pips as Australian Inflation Expectations Rise
The Pound to Australian Dollar exchange rate slumped to a three-week low yesterday as traders reacted to a marked upturn in Australian inflation expectations.
Jumping from 3.6% to 4.4%, the consumer inflation expectations figure helped bolster Reserve Bank of Australia rate hike bets and this sent the high-beta ‘Aussie’ higher by around half a cent against Sterling.
Pound to New Zealand Dollar Slides -100 Pips
GBP/NZD declined by around a cent yesterday as BoE policymaker Ian McCafferty’s hawkish remarks failed to have a lasting impact on the Sterling to New Zealand Dollar exchange rate.
Data Released
13:30 USD Consumer Price Index (YoY) (JUN)
13:30 USD Advance Retail Sales (MoM) (JUN)
14:15 USD Industrial Production (JUN)
15:00 USD U. of Michigan Confidence (JUL P)