Pound Softens Slightly Ahead of UK Retail Sales Report
Demand for the Pound moderated yesterday as investors continued to digest the recent shift in Bank of England (BoE) rate hike expectations.
Sterling made multi-cent gains versus the majors late last week when the UK central bank signalled that rates were likely to rise in the coming months. The Pound then softened a little bit on Monday when BoE Governor Mark Carney cautioned that any potential doses of monetary tightening would be ‘gradual and limited’ and GBP crosses continued to drift lower through yesterday’s session.
The main event to keep an eye on today, in terms of Sterling sentiment, is the August retail sales report, which is anticipated to show yearly growth of 1.4%. It would probably take a stronger figure to give the Pound a fresh boost.
Pound to Euro Exchange Rate Down Despite Rumours of Further ECB Stimulus
The Pound to Euro exchange rate drifted slightly lower yesterday as sturdy German data bolstered the appeal of the single currency.
The latest German ZEW survey of economic confidence jumped from 10.0 to 17.0 in September, smashing expectations of 12.0. Economists who compiled the report said the robust figure reflected stability in the global economy combined with increased business credit and investment in Germany during the second quarter.
However, sentiment towards the single currency was impacted by dark mutterings that policymakers at the European Central Bank (ECB) were considering leaving the door open to additional asset purchases when they meet next month.
Traders have piled into the Euro over the last few months under the assumption that the ECB is preparing to unwind QE and begin normalising monetary policy. If the rumours of open-ended money-printing prove accurate then we could see the Euro spiral lower following October’s central bank meeting.
Pound to US Dollar Exchange Rate Could Hit a New 14-Month High After the Fed’s Policy Statement
‘Cable’ held relatively flat yesterday as US President Donald Trump threatened to ‘totally destroy North Korea’. Markets were largely unresponsive to the President’s UN speech, deciding to bide their time ahead of this evening’s Federal Reserve announcement.
The US central bank is unlikely raise rates this evening but there is potential for the ‘Greenback’ to rally if the Fed’s projection chart still points to a potential rate hike in December.
The majority of analysts do not believe the Fed will actually tighten policy again this year, but it is entirely likely that the US Dollar will rally if the prospect of a December hike is kept alive.
On the other hand a clear dovish statement could easily apply downward pressure on the ‘Greenback’ and propel GBP/USD towards fresh 14-month highs.
Pound to Canadian Dollar Exchange Rate Slips as Crude Oil Hits 5-Month High
The Pound to Canadian Dollar exchange rate ticked a little bit higher yesterday despite a -2.6% drop in monthly Canadian manufacturing sales.
Demand for the commodity-correlated ‘Loonie’ was boosted by a rise in oil prices. Crude jumped to a five-month high yesterday after key players in the Middle East showed that they had complied with the output cuts agreed by OPEC.
Pound to Australian Dollar Exchange Rate Down as RBA Predicts Stable Monetary Policy
Sterling declined by around -80 pips versus the Australian Dollar yesterday morning as markets continued to digest BoE Governor Mark Carney’s comments on the prospect of ‘gradual and limited’ UK rate rises.
Over in Australia the Reserve Bank released its latest minutes report, which intimated that Australian rates would likely hold steady for ‘some time’.
Pound to New Zealand Dollar Exchange Rate Slips -150 Pips as Dairy Prices Rise
The Pound to New Zealand Dollar exchange rate registered a -150 pip decline yesterday as investors reacted positively to a rise in the price of New Zealand’s most-lucrative export; dairy.
Dairy prices increased 0.9% as a result of the latest auction, which was seen to bode well for economic growth in the short-term. GBP/NZD could suffer further losses this afternoon if the second quarter growth report shows an acceleration from 0.5% to 0.8% as anticipated.
Data Released Today
09:30 GBP Retail Sales (YoY) (AUG)
19:00 USD FOMC Rate Decision (Lower Bound) (SEP 20)
19:00 USD Federal Open Market Committee Rate Decision (SEP 20)
23:45 NZD Gross Domestic Product (QoQ) (2Q)
23:45 NZD Gross Domestic Product (YoY) (2Q)