Pound Sterling Exchange Rate Softens as GDP Boost Wears Off
Pound Sterling (GBP) stumbled versus most of the majors – bar the Euro – yesterday as traders locked in profit following Wednesday’s sanguine third quarter UK GDP figures.
The Pound also came under pressure in reaction to the fastest monthly fall in high street sales since the crux of the financial crisis in 2009. The Confederation of British Industry (CBI) reported that 50% of retailers saw sales decline in September, while only 15% saw demand increase.
This left a balance of -36%, which is the worst score since March 2009. Traders adjusted their Sterling positions to reflect anxieties over the future of Britain’s highly-influential retail sector.
Consumer spending accounts for around 70% of total UK growth, so demand for the Pound could come under renewed pressure if future retail figures come in negatively.
Pound to Euro Exchange Rate Hits 9-Day High as ECB Prolongs QE
The Pound to Euro exchange rate rallied by around 40 pips yesterday afternoon, striking a nine-day high as traders reacted to the latest policy statement from the European Central Bank.
ECB President Mario Draghi announced that from January it would be halving the amount of monthly Eurozone bond purchases from €60 billion to €30 billion. This alone would be expected to increase yields on European debt and therefore bolster the appeal of the single currency.
However, Draghi was keen to stress that the announcement did not amount to ‘tapering’, signalling that the central bank intends to continue purchasing bonds past September 2018.
The Euro slumped following this admission, as investors priced-in the potential for longer-term ECB QE and, subsequently, a longer-than-expected period of ultra-low interest rates. GBP/EUR could continue to post gains, so long as no fresh Brexit concerns start to impact Sterling demand in the run-up to the 2 November Bank of England rate decision.
Pound to US Dollar Exchange Rate Loses Out Ahead of US GDP Report
While Sterling witnessed a little bit of a comedown yesterday, following the strong GDP related gains, it looks like cross-border flows also helped to drag GBP/USD lower yesterday. EUR/USD is the world’s most-traded currency pair, and it lost -130 pips yesterday.
This boost in the US Dollar’s favour appeared to drive the ‘Greenback’ higher across the board, including versus the Pound.
The Pound to US Dollar exchange rate lost around -100 pips yesterday but there is potential for a rebound if this afternoon’s US GDP data flops. Traders are primed for a third quarter annualised growth print of 2.6%, down from 3.1% in the second quarter.
Anything lower than this could bolster demand for ‘Cable’, while anything higher could make it difficult for GBP/USD to mount any meaningful rallies.
Pound to Canadian Dollar Exchange Rate Softens, but Further Gains Possible
The Pound to Canadian Dollar exchange rate dipped around -80 pips yesterday, however, having racked up sizzling gains of around 300 pips on Wednesday, GBP/CAD is still looking quite attractive at this juncture.
The Bank of Canada’s shift from hawkish to dovish outlook means that market sentiment is soft towards the ‘Loonie’ and Sterling could easily push for new four-month highs over the coming weeks.
Pound to Australian Dollar Exchange Rate Outlook Positive
Sterling slipped by around -90 pips versus the Australian Dollar yesterday, but GBP/AUD remains four cents higher than it was this time last week.
Softer-than-anticipated Australian consumer prices earlier this week added to concerns over the outlook for the Reserve Bank of Australia. While the BoE is tipped to hike rates next week, traders believe the RBA may hold tight until late 2018, or even 2019.
This dovish outlook suggests there is potential for GBP/AUD to appreciate further in the near-term.
Pound to New Zealand Dollar Exchange Rate Could Strike New 16-Month Highs
The Pound to New Zealand Dollar exchange rate softened by around half a cent yesterday, however, Sterling remains close to 16-month highs versus the ‘Kiwi’ and could easily register further gains, considering that New Zealand’s new coalition government plans to ‘review and reform’ the Reserve Bank of New Zealand.
Date Released Today
13:30 USD Gross Domestic Product (Annualized) (3Q A) High 2.6%