GBP Exchange Rates Dip after Borrowing Data, but GBP/EUR and GBP/USD Stand Firm
Pound Sterling (GBP) exchange rates began the week on a firmer footing but soon lost ground after the release of the UK’s latest public borrowing figures.
Public sector net borrowing came in higher-than-forecast, putting Chancellor Philip Hammond under pressure before tomorrow’s budget.
However, while Sterling dipped against some of its rivals, it remained up on the day’s opening levels against the Euro and US Dollar.
Today’s Live GBP Headlines
Pound Sterling rallies on Brexit progress hopes – UK reportedly ready to table £40bn EU divorce offer.
GBP/EUR exchange rate up 70 pips – German coalition talks break down.
GBP/USD exchange rate strikes 3-week high – Fed’s Yellen due to speak.
GBP/AUD exchange rate holds near 5-month high – RBA Governor speech in focus.
Pound Sterling Exchange Rate Boosted by Brexit Progress Hopes
Pound Sterling (GBP) exchange rates performed well yesterday as investors responded positively to Brexit developments over the weekend.
UK Chancellor Philip Hammond said that Britain was close to making progress in the Brexit talks that would give businesses clarity over the future terms of trade, and it’s believed that the UK is preparing to offer £40 billion to settle its EU divorce bill.
If European officials accept the offer then it could pave the way for the discussions to move to future trade and allow Britain to secure a transitional deal.
This would likely give rise to increased business investment, boost economic sentiment and therefore bolster the appeal of the Pound.
Pound to Euro (GBP/EUR) Exchange Rate Gains on German Coalition Breakdown Despite Brexit Implications
The Pound to Euro (GBP/EUR) exchange rate hit a weekly high yesterday as demand for the single currency was hit by news that German coalition talks had broken down.
The Euro tumbled in a knee-jerk reaction to the shock announcement as it leaves German Chancellor Angela Merkel in a difficult position.
German President Frank-Walter Steinmeier called
on parties to ‘reconsider’ all options, in an attempt to persuade party leaders to put their differences behind them and form a working coalition.
If this can’t be achieved Merkel would probably be minded to call new elections, as she has said that a new vote would be preferable to running a minority government.
While the uncertainty has weighed on the single currency, it could actually prove more bearish for Sterling in the long run because domestic pressure on Merkel is likely to limit her ability to grant Britain any trade-boosting concessions in the Brexit negotiations.
Pound to US Dollar (GBP/USD) Exchange Rate Hits Three-Week High
GBP/USD struck its highest level for almost three weeks yesterday as hopes of the Brexit talks progressing from the divorce bill to future trade buoyed demand for the Pound.
Meanwhile, a lack of faith in US President Donald Trump’s ability to pass growth, inflation and wage-boosting tax reform measures weighed on the US Dollar.
Federal Reserve President Janet Yellen is due to speak this evening at the Stern Business School, but any impact on the ‘Greenback’ may prove limited due to saturated bets that the US central bank will raise interest rates next month.
Expectations of another rate hike in March currently stand at around 40% but Yellen is unlikely to make any specific promises of future rate rises in tonight’s speech.
Pound to Canadian (GBP/CAD) Dollar Exchange Rate Strengthens as Investors Cut Bullish ‘Loonie’ Bets
Sterling hit a three-week high versus the Canadian Dollar yesterday as oil prices slid and bets for CAD gains receded.
Data from the Commodity Futures Trading Commission showed that the number of investors betting on the Canadian Dollar appreciating had dropped by around -30,000 since October, reflecting softer expectations of rate rises from the Bank of Canada.
Pound to Australian Dollar Exchange Rate Holds Near 5-Month High
The Pound to Australian Dollar exchange rate remained close to its highest level since May at the start of the week as subdued economic growth, softening consumer confidence and weak inflation expectations continued to drag on demand for the high-beta ‘Aussie’.
A speech later this morning from Reserve Bank of Australia Governor Philip Lowe could give AUD exchange rates a boost if he talks up the prospect of interest rate rises, but he is more likely to conclude that the current economic climate does not warrant higher borrowing costs.
Pound to New Zealand Dollar Exchange Rate Close to Strongest Level Since Brexit
The Pound to New Zealand Dollar exchange rate held firm yesterday, having recently struck its highest level since the Brexit vote.
Demand for the ‘Kiwi’ Dollar remains weak due to expectations that the Labour-led coalition government will push the Reserve Bank of New Zealand to keep rates low for longer.
In the short-term, volatility is expected around this afternoon’s New Zealand dairy auction, as the domestic currency often trades in tandem with rises and falls in the price of its most-lucrative export.
Data Affecting Today’s Pound Sterling Forecast
09:05 AUD RBA Governor Lowe Gives Speech in Sydney
NZD Dairy Auction Whole Milk Powder MT (NOV 21)
23:00 USD Fed’s Yellen Speaks at Stern Business School