Pound Sterling Flat as Former BoE Official Describes UK as ‘Sick Man of Europe’
The Pound traded fairly smoothly yesterday, despite claims from former Bank of England official David Blanchflower that there is ‘absolutely no basis’ for a rate hike in November.
The former policymaker went on to describe Britain as ‘the sick man of Europe’, insisting that ‘enhanced uncertainty over the form of Brexit’ was likely to constrain growth even further. ‘Pathetic growth of 0.5% in the first half of the year wins the UK the wooden spoon’, he said.
Sterling softened slightly following the remarks but most of the Pound’s losses were reversed by the end of the session.
Pound to Euro Exchange Rate Strikes 10-Week High Due to German Election Jitters
The Pound to Euro exchange rate strengthened by around a third of a cent yesterday to hit a 10-week high as German election concerns continued to weigh on the single currency.
Investors believe that it could take weeks of negotiations before German Chancellor Angela Merkel is able to form a working coalition with a range of minor parties, following her CDU party’s worst showing since 1945.
Analysts fear that serious differences in policy could delay the coalition talks and prolong the political uncertainty in the Eurozone’s largest economy, and this acted as a drag on demand for the Euro.
The single currency is also suffering from jitters ahead of the Catalan independence referendum. The vote, which has been declared illegal by Spain’s constitutional court, could create further instability if it emboldens Catalonians in their efforts to gain autonomy – something which could prompt additional independence votes and political uncertainty across Spain and other areas of Europe.
Pound to US Dollar Exchange Rate Shrinks -30 Pips as Fed’s Yellen Hints at Further Rate Rises
‘Cable’ deprecated by around -30 pips yesterday as GBP/USD continued to pullback from last week’s 14-month highs.
Technical analysis suggests that Sterling could slide further against the US Dollar before demand is triggered by significant support, however, traders believe that GBP/USD should start rising again at some point over the next few weeks.
The US Dollar remained steady during the evening as Federal Reserve Chairwoman Janet Yellen signalled further ‘gradual’ rate rises could be on the cards despite soft inflation. The positive message was seen to increase the possibility of a December rate hike, as communicated in the Fed’s latest ‘dot-plot’ graph.
Later today the ‘Greenback’ could gain support if the August durable goods report prints at 1.0% as expected. Orders for long-lasting, usually expensive, products plummeted -6.8% in July.
Pound to Canadian Dollar Exchange Rate Down Ahead of BoC Poloz Speech
The Pound to Canadian Dollar exchange rate ticked slightly lower again yesterday due to rises in the oil market. Crude struck a new two-year high as production cuts continued to reduce the supply glut. Fears that Turkey could close a pipeline from Iraq also drove oil markets higher.
Following a Kurdish independence referendum in Iraq, Turkish President Recep Tayyip Erdogan threatened to ‘close the tap’ on a pipeline that connects Iraq with European ports.
This attempt to deter additional pushes for Kurdish independence in his own country pushed oil higher and subsequently increased demand for the commodity-correlated ‘Loonie’.
Later this afternoon Bank of Canada Governor Stephen Poloz is due to speak and any hints that rates could rise again soon could offer additional support to the North American currency.
Pound to Australian Dollar Exchange Rate Rallies 100 Pips
Sterling rallied by almost 100 pips versus the Australian Dollar yesterday as risk appetite remained soft following the recent rise in tensions between the US and North Korea.
Fears of higher interest rates in the UK and US also weighed on demand for the ‘Aussie’, which is often well-bid during times of cheap borrowing costs, due to Australia’s relatively high interest rates. Conversely the ‘Aussie’ is usually subject to selling during times of uncertainty because of its volatile nature.
Pound to New Zealand Dollar Exchange Rate Spikes 150 Pips Ahead of RBNZ
The Pound to New Zealand Dollar exchange rate appreciated by over 150 pips yesterday as risk aversion flows and enhanced Federal Reserve rate hike bets dragged on demand for the high-beta ‘Kiwi’.
We could see further moves in GBP/NZD this evening when the Reserve Bank of New Zealand meets. No interest rate changes are expected but markets could react positively to any hawkish rhetoric, or negatively to any dovish hints.
Data Released Today
13:30 USD Durable Goods Orders (AUG P)
16:45 CAD Speech – Stephen S. Poloz, Governor
21:00 NZD Reserve Bank of New Zealand Rate Decision (SEP 28)