Demand for Pound Remains Weak Despite Hawkish BoE Comments
Demand for the Pound remained broadly weak on Friday despite comments from Bank of England policymaker Michael Saunders on raising interest rates.
The BoE official, one of two who voted for higher rates in August, said that there was much less spare capacity in the UK economy than there was a few years ago, suggesting that the bank would have to be a ‘bit more activist’ if growth were to surprise to the upside.
Investors largely overlooked the upbeat comments because it is widely acknowledged that Saunders is one of the most hawkish members of the monetary policy committee. For Sterling to rally, we would need to see one of the six BoE officials who voted to keep rates on hold in August come out in support of tighter policy.
Pound to Euro Exchange Rate Slides to 10-Month Low
The Pound to Euro exchange rate plunged to a 10-month low on Friday, depreciating a third of a cent to what would actually be a seven-year low had it not been for last October’s flash crash.
US investment bank Morgan Stanley released forecasts on Friday suggesting that there could be further for the Pound to fall against the Euro. The bank said that GBP/EUR could fall to parity for the first time in the single currency’s 18-year history by the end of next year.
Pound to US Dollar Exchange Rate Rises Through Resistance as US Inflation Disappoints
The Pound registered a rare set of daily gains on Friday, rallying by around 40 pips versus the US Dollar following slightly lower-than-anticipated US inflation numbers.
The latest American consumer price index report came in at 1.7%, down on forecasts of 1.8%. The score weighed on the ‘Greenback’ as it was seen to reduce the probability of another rate hike from the Federal Reserve this year. Fed sentiment was also damaged by a slowdown in average US earnings, from 0.9% to 0.7%.
US President Donald Trump’s warning to North Korea that the US military was ‘locked and loaded’ added to the trend of risk aversion in markets but that did not translate into gains for the US Dollar against the Pound.
Pound to Canadian Dollar Exchange Rate Down Half a Cent
Sterling tumbled by around half a cent against the Canadian Dollar on Friday as falling US CPI inflation was seen to reduce the prospect of a Fed rate hike.
Tighter policy in the US would likely lead to reduced liquidity in the global economy, and therefore less demand for the risk-sensitive ‘Loonie’, which explains why CAD rose following the US inflation print.
Pound to Australian Dollar Exchange Rate Volatile Following Confusing RBA Statement
A confusing message from Reserve Bank of Australia Governor Philip Lowe led to a day of volatility in GBP/AUD on Friday. The RBA chief noted that rates were more likely to rise than fall, but bemoaned the lack of robust wage growth, leaving the ‘Aussie’ Dollar in limbo for most of the session.
Pound to New Zealand Dollar Exchange Rate Loses -70 Pips
The Pound to New Zealand Dollar exchange rate drifted lower by around -70 pips on Friday as downbeat UK sentiment continued to drive price action in most Sterling pairs.
Data Released Today
Euro-Zone Industrial Production w.d.a. (YoY) (JUN)