Today’s Currency Headlines
Sterling rises versus most majors – Little on economic calendar this week.
GBP/EUR up 80 pips – ECB Draghi speech on tap.
‘Cable’ appreciates 100 pips – GBP/CAD rallies 50 pips.
Crude oil hits 2-year high – BoC Poloz speaking in the afternoon.
Pound Sterling Exchange Rates Continue to Rebound
The Pound continued drifting higher yesterday as investors appeared to row back on the decision to aggressively sell Sterling following the Bank of England’s rate hike last week.
The Pound had dropped significantly following the BoE policy statement, which saw rates rise 25 basis points but only forecast a further 50 basis points of rises between now and 2020.
There is little on the economic calendar to interest Sterling traders this week, so we could see the Pound trade with relatively little volatility versus the majors over the next few days.
However, any surprise progress in the Brexit process could bolster Sterling’s appeal, while any setbacks could weigh.
Another situation that requires monitoring is the Westminster sexual harassment scandal.
Prime Minister Theresa May has already seen one cabinet member, defence secretary Michael Fallon, resign and any further embarrassments could lead to political instability and depressed demand for the Pound.
Pound to Euro Exchange Rate Rallies 80 Pips Ahead of Eurozone Releases
The Pound to Euro exchange rate rallied by around 80 pips yesterday at the beginning of a week that doesn’t seem to have much in store for traders of the GBP/EUR currency pair.
This morning sees European Central Bank President Mario Draghi speak in Frankfurt, and there could be some fluctuation in the single currency around the talk.
However, the ECB recently outlined plans to continue with its quantitative easing scheme past September 2018, which weakened the Euro, and there is nothing to suggest that the central bank is likely to alter its outlook at this juncture.
Eurozone retail sales data is tipped to show an acceleration from 1.2% to 2.8% in September, which could lend the single currency some support. On the other hand, a softer-than-anticipated print could have the opposite effect. Either way, big moves are not expected.
Pound to US Dollar Exchange Rate Appreciates 100 Pips
Sterling stole around 100 pips worth of gains from the US Dollar yesterday. Data showing that UK car sales tumbled -12% in October failed to impact the Pound, even though the downbeat data was seen to suggest that consumer confidence is slumping.
Analysts warned that the Pound’s post-Brexit depreciation was contributing to the decline in car sales by stoking inflationary pressures.
Over the next few weeks it will be interesting to see whether US President Donald Trump is successful with his plans for massive tax cuts in America. If he manages to pass the bill then the ‘Greenback’ could easily catch a bid as the prospect of higher inflation buoys 2018 Federal Reserve rate hike bets.
However, if the tax bill runs into the kind of resistance that Trump’s healthcare reform hit then the US Dollar could suffer as investors lose faith in Trump’s policies.
Pound to Canadian Dollar Exchange Rate Rises Despite 2-Year High Crude Oil Prices
The Pound to Canadian Dollar exchange rate increased in value by around half a cent yesterday. However, the price of crude oil, Canada’s most lucrative export, rose to a two-year high following a corruption purge in Saudi Arabia.
The purge of Saudi princes and officials has sparked concerns over the stability of supply chains in the Middle East and this drove crude higher.
If oil prices maintain this kind of momentum then it could lead to increased demand for the commodity-correlated ‘Loonie’.
Bank of Canada Governor Stephen Poloz is due to speak this afternoon and if he strikes a hawkish tone then this could also play into the Canadian Dollar’s hands.
Pound to Australian Dollar Exchange Rate Rallies 50 Pips
The Pound to Australian Dollar (GBP/AUD) exchange rate continued to bounce back from Thursday’s post BoE blues yesterday with a 50-pip daily appreciation.
With little expectation of a rate hike from the Reserve Bank of Australia, the ‘Aussie’ failed to make up any ground at the beginning of the week.
Pound to New Zealand Dollar Exchange Rate Could Gain on Dovish RBNZ
Sterling ticked higher by around 70 pips versus the New Zealand Dollar yesterday and we could see GBP/NZD press ahead further over the next few days.
The Reserve Bank of New Zealand is tipped to leave interest rates on hold at 1.75% on Wednesday and any dovish rhetoric is liable to weigh heavily on the ‘Kiwi’.
Data Released Today
09:00 EUR ECB’s Draghi, Lautenschlaeger, Nouy Speak in Frankfurt
10:00 EUR Eurozone Retail Sales (YoY) (SEP)
18:00 CAD Bank of Canada’s Stephen Poloz Speech in Montreal