Pound Sterling Exchange Rates Dip after UK Inflation Data
Pound Sterling (GBP) exchange rates edged slightly lower on Tuesday as UK core inflation fell by more than expected. Non-core inflation eased to 3.0% while core inflation fell to 2.5%.
According to the BBC: ‘The ONS said it was too early to say whether this was the start of a longer-term reduction in the rate of inflation.
The Bank of England has said it thinks inflation peaked at the end of 2017 and will fall back to its target of 2% this year.’
As an easing rate of inflation could keep the Bank of England (BoE) dovish on the subject of raising interest rates, the result left the Pound a little weaker.
While there is no UK data set for release today, BoE official Michael Saunders is due to deliver a speech at an event in London. The policymaker has been hawkish about increasing borrowing costs in the past, so if he discusses monetary policy the Pound could climb.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Firms on German Coalition Woes
While the Pound softened against peers like the US Dollar on Tuesday, the Pound Sterling to Euro (GBP/EUR) exchange rate was able to stand firm thanks to a setback in German coalition talks.
Hopes that Angela Merkel’s CDU/CSU would be able to form a grand coalition with the Social Democrats were undermined when the Berlin branch of the party voted against the move.
As stated by The Financial Times: ‘It’s a bad omen for SPD boss Martin Schulz ahead of a critical party conference in Bonn next Sunday which will vote on whether to start formal coalition negotiations with the conservatives.’
The Eurozone’s construction output figures may have an impact on demand for the Euro, but investors will be more interested in inflation data for the currency bloc.
The final readings are expected to show that non-core inflation eased to 1.4% – further away from the European Central Bank’s (ECB) 2% target. The Euro could soften if that proves to be the case.
Pound to US Dollar (GBP/USD) Exchange Rate Down before Fed Speech
The Pound Sterling to US Dollar (GBP/USD) exchange rate dropped from its post-referendum highs on Tuesday and could extend losses in the hours ahead if the US manufacturing and industrial production reports show an increase in output.
As it stands, industrial production is believed to have increased by 0.4% on the month (up from 0.2% in November) while manufacturing production rose 0.3%.
Investors will also be focusing on a speech from Federal Reserve Bank President Charles Evans.
Evans has previously voiced concerns about low inflation expectations, so it will be interesting to see what stance he takes following December’s sturdy consumer price data.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Losses Likely on BoC Rate Hike
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate could tumble later today if the Bank of Canada (BoC) delivers a rate hike as expected.
While a rate hike would lift the Canadian Dollar, gains could be limited if the central bank indicates that further interest rate adjustments will be few and far between.
On the other hand, a hawkish outlook for the future path of borrowing costs has the potential to send the Canadian Dollar soaring.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Fluctuates on Upbeat Aussie Data
The Pound to Australian Dollar (GBP/AUD) exchange rate fluctuated throughout Tuesday’s European session before edging slightly lower overnight as the Wespac Consumer Confidence index rose 1.8%, taking the measure to 105.1.
Separate Australian reports showed a 2.1% increase in home loans and a 1.5% climb in investment lending.
The next influential Australian reports – the nation’s inflation expectation and employment figures – are due out tomorrow, and AUD gains could be on the cards if they impress.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Gains Despite Dairy Price Rise
The Pound to New Zealand Dollar (GBP/NZD) exchange rate advanced on Tuesday despite the price of New Zealand’s key commodity rising at the latest Global Dairy Trade auction.
As Reuters reports: ‘The Global Dairy Trade Price Index climbed 4.9 percent – the largest gain in more than a year – with an average selling price of $3,310 per tonne, in the auction held early on Wednesday.’
The New Zealand Dollar failed to be lifted by the surge in prices as the ANZ commodity price index plummeted -2.2% in December, following a -0.9% slide in November.