Pound Sterling Close to 8-Month Trade-Weighted Low
The Pound lost ground against the majors on Friday as bearish Bank of England bets continued to weigh on demand. On a trade-weighted basis, Sterling tumbled towards its lowest level in eight months, with investors unconvinced that the UK central bank will move to raise interest rates for at least a year. Indeed, data last week pointed to subdued growth in the retail sector and stalling inflationary pressures.
Although UK CPI, at 2.6%, is currently above the bank’s 2.0% target, the effects of last year’s post-Brexit Sterling depreciation are beginning to fade from the 12-month figures. Subsequently, price pressures are projected to start falling back towards the target rate in the New Year.
Pound to Euro Exchange Rate Strikes 10-Month Low, ECB Tightening Bets Intact
The Pound to Euro exchange rate drifted lower on Friday as markets gave the UK currency a battering across the board. GBP/EUR struck its lowest level for 10-months – in what would have been a seven-year low had it not been for last October’s flash crash when Sterling dipped around five cents and then recovered within a matter of minutes.
It seems that traders are prepared to push ahead with hawkish European Central Bank policy bets, even though the central bank’s latest minutes report revealed that some policymakers were concerned with the strength of the single currency. Some analysts argued that this warning meant the ECB was not likely to start tapering its quantitative easing scheme anytime soon, as this would likely lead to further appreciation in the Euro. However, market positioning since the statement appears to point to renewed confidence that ECB policy will be tightened over the next six months.
Pound to US Dollar Exchange Rate Touches 5-Week Low
‘Cable’ touched a five-week low on Friday afternoon as market sentiment remained in favour of selling Sterling.
The US Dollar benefitted from a decent University of Michigan consumer sentiment report, which rose from 93.4 to a seven-month high of 97.6 at the beginning of August. The better-than-expected confidence score was influenced by a jump in consumer expectations, however, the fallout from the Charlottesville protests (which occurred too late in the survey timeframe to have a significant impact on the results) could drag outlook lower in next month’s report.
Since the protests, President Donald Trump has disbanded two business advisory groups following resignations from high profile business leaders, many of whom were unhappy with the President’s decision to compare left-wing anti-fascist protestors to right-wing white supremacists and neo-Nazis.
Trump’s chief strategist Steve Bannon has also left the White House over the last week, and markets now have very little faith that Trump will be able to pass any kind of serious economic reforms. This could weigh on the ‘Greenback’ over the next few months, however, the Pound could struggle to capitalise as it suffers from enough of its own problems.
Pound to Canadian Dollar Exchange Strikes January Low
The Pound to Canadian Dollar exchange rate slumped to its lowest level since January on Friday, depreciating by over -120 pips on the day.
The ‘Loonie’ appeared to gain confidence following an inflation report detailing that price pressures in Canada accelerated from 1.0% to 1.2% in July. The rising consumer price index print was seen to support the Bank of Canada’s plan to start raising interest rates in the foreseeable future and this bolstered the appeal of the high-beta Canadian Dollar.
Pound to Australian Dollar Exchange Rate Sinks to 5-Month Low
The Pound to Australian Dollar exchange rate plunged -100 pips to hit its lowest level in almost five months on Friday as rising commodity prices boosted the risk-correlated ‘Aussie’ and dovish BoE bets weighed on Sterling.
Pound to New Zealand Dollar Exchange Rate Sheds -80 Pips
The Pound to New Zealand Dollar exchange rate slid by around -80 pips on Friday, striking a three-week low in the process, as a moderate uptick in commodity prices injected life into the risk-sensitive ‘Kiwi’ Dollar.