Pound Sterling Exchange Rates Soften Across the Board
Pound Sterling (GBP) exchange rates slid across the board yesterday, erasing most of GBP’s Monday gains.
There was little fresh data to influence investor sentiment towards the Pound but comments from European chief negotiator Michel Barnier could have played a part in dragging Sterling lower. Barnier reiterated that Britain would not be given a bespoke deal that gave preferential treatment to individual industries, such as finance.
‘There is not a single trade agreement that is open to financial services. It doesn’t exist… In leaving the single market, [the UK] loses the financial services passport’, he said.
Bankers from the City of London were disappointed and argued that just because a free trade deal has not involved financial services before does not mean it can’t be done.
Data Affecting Today’s GBP Forecasts
GBP Carney Speaks at Parliament Hearing in London
NZD Gross Domestic Product s.a. (QoQ) (3Q)
NZD Gross Domestic Product (YoY) (3Q)
Pound to Euro (GBP/EUR) Exchange Rate Slides to 14-Day Low
The Pound to Euro (GBP/EUR) exchange rate skidded by -60 pips to strike a two-week low yesterday.
Brexit concerns appeared to weigh on GBP/EUR, even though progress has been made in the talks this month. During today’s session, movement in the pair is likely to be dictated by the content of Bank of England Governor Mark Carney’s speech to Parliament.
If the Governor strikes a cautious tone, warning of the potential pitfalls of Brexit, then soft rate hike expectations could pull the Pound lower. However, if Carney sounds more optimistic on Brexit due to recent developments we could see Sterling mount a recover versus the single currency.
Pound to US Dollar (GBP/USD) Exchange Rate Loses Out as US Tax Bill Approaches
The Pound to US Dollar (GBP/USD) exchange rate slipped by around a third of a cent yesterday as negative Sterling sentiment met with growing expectations that US President Donald Trump’s tax bill would be passed into legislature.
Some analysts believe the tax reform will boost domestic growth and price pressures to the extent that it persuades the Federal Reserve to raise interest rates more aggressively than the three hikes that are currently projected in the Fed’s dot-plot graph.
Indeed, if US policymakers begin to make hawkish statements relating to the tax cut bill then we could easily see demand increase for the ‘Greenback’.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Drifts Higher
The Pound to Canadian Dollar (GBP/CAD) exchange rate was one of the only currency pairs in which Sterling came out on top yesterday.
The commodity-sensitive Canadian Dollar continued to suffer from the recent plummet in Canadian oil prices, which took crude from Canada down to around half the price of crude from the US. This is a big issue for the Canadian Dollar going forward because oil is the nation’s most-lucrative export.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Softens on Upbeat RBA Minutes
The Australian Dollar strengthened versus the Pound yesterday following a relatively upbeat minutes report from the Reserve Bank of Australia.
The RBA noted that economic growth was likely to remain robust coming into the New Year and forecast that job creation would run ‘above average’ in the first half of 2018.
This boosted rate hike expectations, however, the ‘Aussie’ gave back some of its gains later on in the day as traders bet that the US tax bill could boost Fed rate expectations and subsequently reduce demand for riskier assets.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Rallies Ahead of NZ GDP Report
The Pound to New Zealand Dollar exchange rate drifted higher during the afternoon yesterday as traders reacted to a -3.9% fall in the price of dairy, New Zealand’s most important export.
And we could see a little bit more of an appreciation in GBP/NZD later tonight if the New Zealand third quarter GDP is revised lower from 0.8% to 0.6%, as anticipated.