Demand for Pound Sterling Improves Despite IMF Growth Downgrade
The Pound ticked higher versus some of the majors at the start of the week as traders locked in profit following last week’s steep Sterling losses.
Demand for the Pound shrunk last week on news of cooling price pressures and fresh fears over Britain’s ability to agree a positive Brexit trade deal. Although Sterling managed to claw back some of its recent losses yesterday, there was more bad news in the form of a growth downgrade from the International Monetary Fund.
The IMF noted that Brexit was likely to have a ‘mild negative’ affect on the UK economy and cut Britain’s 2017 GDP forecast from 2.0% to 1.7%.
Pound to Euro Exchange Rate Rallies 50 Pips from 8-Month Low
The Pound to Euro exchange rate recovered by around half a cent yesterday, having reached a series of eight-month lows at the end of last week’s session.
Data in the Eurozone showed that private sector output decelerated to a six-month low in June. The composite PMI index dropped from 56.3 to 55.8 as manufacturing output cooled, however, the indicator still points to quarterly growth of around 0.6% so the single currency was largely unmoved by the result.
The only ecostat likely to have an impact on GBP/EUR movements today is the morning’s IFO German business climate index, which is tipped to dip minimally from 115.1 to 114.9.
Pound to US Dollar Exchange Rate Overcomes Psychological Resistance Level as IMF Cuts US Growth Projections
The Pound to US Dollar exchange rate eked out gains of around a third of a cent yesterday, which took GBP/USD back above longstanding psychological resistance.
The ‘Greenback’ appeared to fall out of favours with investors in reaction to the IMF report, which featured sharper revisions to US growth prospects than the UK.
While 2017 British GDP forecasts were downgraded from 2.0% to 1.7%, the IMF did not adjust its 2018 projection of 1.5%. The American forecasts, meanwhile, were cut from 2.3% to 2.1% in 2017 and from 2.5% to 2.1% in 2018.
The IMF concluded that US President Donald Trump was unlikely to deliver his infrastructure spending and tax reform plans that many believed would give the US economy a sharp shot in the arm during the first few years of his premiership.
Pound to Canadian Dollar Exchange Rate Holds Flat
The Pound remained close to five-month lows versus the Canadian Dollar yesterday.
Sterling failed to mount a sustainable rally against the risk-sensitive ‘Loonie’, which was recently energised by the Bank of Canada’s decision to raise interest rates in July and signal that further hikes are on the cards.
Oil prices inched slightly higher on the day, lending the ‘Loonie’ some support, as Nigeria agreed to cap crude production as part of OPEC’s latest attempts to drive oil markets higher.
Pound to Australian Dollar Exchange Rate Holds Friday Gains
The Pound to Australian Dollar exchange rate held onto Friday’s gains yesterday as markets paused for thought following a mixed set of messages from the Reserve Bank of Australia.
GBP/AUD slouched to three-month lows last week in reaction to comments from the RBA suggesting that the ‘normal’ rate of interest down under should be around 3.50% – far higher than the current rate of 1.50%.
However, the ‘Aussie’ dipped sharply late last week when the Australian central bank sought to clarify its position by affirming that it would not be hiking interest rates just because other central banks are considering tightening.
Pound to New Zealand Dollar Rebounds from 3-Week Low
Sterling recovered from a three-week low against the New Zealand Dollar yesterday, appreciating by just over a cent as investors locked in profit from GBP/NZD’s recent descent.
Data Released
EUR German IFO – Business Climate (Jul)
USD Consumer Confidence (Jul)