BoE’s Ramsden More Upbeat on Rate Hikes, but Corbyn’s Move to Outflank Tories Unsettles Pound Sterling
Pound Sterling received a temporary boost yesterday after Deputy Governor Sir David Ramsden claimed his position on interest rates had changed slightly and he now saw a case for rates rising ‘somewhat sooner rather than somewhat later’.
However, GBP later sank after Labour Party leader Jeremy Corbyn gave a speech in which he called for the UK to negotiate a new customs union with the EU.
From a market point of view the idea is a good one, but the fact it came from the opposition is worrying, as it could see Labour outflank the Conservatives and therefore pose a serious threat should Theresa May’s continued weak position in government trigger another general election.
The only development on the UK economic calendar today is a speech from Bank of England (BoE) official Sam Woods.
GBP/EUR Exchange Rate Weakens as Markets Ignore Draghi’s Calls for Patience
The GBP/EUR exchange rate weakened yesterday, despite comments from European Central Bank (ECB) President Mario Draghi calling for patience with regards to monetary policy adjustments.
However, against the backdrop of continually-strengthening Eurozone growth it seemed that Draghi was trying to hold back the tide, with traders failing to buy into his caution.
The Euro could weaken today, given that preliminary CPI data for February is expected to show a minor year-on-year slowdown.
GBP/USD Exchange Rate Weakens despite Bullard Warning
GBP/USD was on soft form yesterday, although the US Dollar wasn’t exactly on glowing form itself.
Demand for USD was softened by comments from Federal Reserve official James Bullard, who claimed that hiking interest rates substantially further would risk overtightening policy, citing weak productivity growth and high global demand for safe-haven US assets like government bonds as reasons policy needed to remain relatively accommodative.
New Federal Reserve Chair Jerome Powell testifies to the House Financial Committee today; just one of several high-impact developments on the US economic calendar.
Pound Able to Climb against Canadian Dollar as Markets Await CA Budget
With Canadian Finance Minister Bill Morneau set to reveal his new budget tonight, markets weren’t in the mood to buy the Canadian Dollar yesterday. This saw the GBP/CAD exchange rate rise half a percent, despite the weakness in Sterling.
GBP/AUD Holds Opening Levels as Markets Fret on Australian Business Tax Argument
Fierce debate over the issue of business tax cuts in Australia weighed on the Australian Dollar yesterday, preventing the GBP/AUD exchange rate from registering losses.
Malcolm Turnbull’s plans to significantly cut business taxes to make the Australian economy more competitive are unpopular with the opposition Labour Party, who are only outnumbered by the ruling coalition in Parliament by one seat.
New Zealand Dollar Benefits as Peers Weighed Down by Macroeconomic Issues; GBP/NZD Slips Lower
With the safer currencies largely on muted form and the commodity-correlated Australian and Canadian Dollars both on poor form as well, the New Zealand Dollar was left as the major default currency of choice for many yesterday.
GBP/NZD therefore weakened as markets flocked to the high-yield ‘Kiwi’.
Net migration figures are the only New Zealand data scheduled for publication today.