Pound Sterling to Euro (GBP/EUR) Exchange Rate Fails to Benefit from Rate Hike Speculation
The Pound Sterling to Euro (GBP/EUR) exchange rate remained on a generally weaker footing on Friday, continuing to unwind some of the week’s earlier gains.
As there was little expectation for any major developments regarding Brexit at the EU summit there appeared little reason to favour the Pound. Even though the EU Summit saw leaders formally sign the negotiation guidelines for the next phase of Brexit talks, and Bank of England (BoE) policymaker Gertjan Vlieghe opted for a fairly hawkish tone in his latest comments, this was not enough to shore up Sterling.
It appears markets are already considering the odds of a May interest rate hike fairly priced into GBP.
As UK mortgage approvals are forecast to have dipped on the month in February, the appeal of the Pound is unlikely to pick up as a new week of trading gets underway.
Euro (EUR) Exchange Rates Benefit from EU Announcement
The single currency reacted positively to the announcement that the EU would not be subjected to US tariffs on steel and aluminium for the time being, with the Euro to Pound (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates recording gains.
However, this concession failed to particularly diminish the prospect of trade relations between the Eurozone and the US souring further in the months ahead.
As a result the Euro struggled to find particular traction against many of the majors, losing ground heading into the weekend.
The common currency received a little lift as the European session opened this morning as Q4 French GDP was positively revised from 0.6% to 0.7%.
US Dollar (USD) Exchange Rates Struggling as Fears of a Trade War Intensify
An unexpectedly strong rebound in US durable goods orders was unable to shore up US Dollar (USD) exchange rates during Friday’s European session.
Even though this offers further evidence that the world’s largest economy is strengthening, the impact of the data was limited by the latest speculation over the prospect of a US-China trade war.
With tit-for-tat tariffs having the potential to dent US economic growth, the appeal of the US Dollar naturally diminished on the back of the administration’s latest rhetoric.
Improved Chicago and Dallas Fed activity indexes may still offer support to the US Dollar later.
Canadian Dollar (CAD) Exchange Rates Shrug off Impact of Rising Inflation
Although the Canadian consumer price index strongly bettered forecasts, accelerating from 1.7% to 2.2% on the year, Canadian Dollar (CAD) exchange rates struggled to capitalise on this positive data.
In part this was thanks to an underwhelming domestic retail sales figure, which failed to reverse the previous month’s contraction. Even Brent crude breaking back above the US$70 per barrel mark was not enough to set the Canadian Dollar on a bullish run.
However, if oil markets remain in a more optimistic mood at the start of the week this could help to keep CAD exchange rates from seeing any notable losses.
Australian Dollar (AUD) Exchange Rates Boosted by Tariff Exemption
Confirmation that Australia will be exempted from US tariffs on steel and aluminium, at least temporarily, encouraged Australian Dollar (AUD) exchange rates to strengthen ahead of the weekend.
While fears of an imminent trade war between the US and China weighed on market sentiment, this failed to particularly dent AUD exchange rates as a softer US Dollar helped to offset the impact of trade war concerns.
Worries over the increasingly protectionist outlook of the US could return AUD exchange rates to a softer footing today however, with risk appetite still rather fragile.
New Zealand Dollar (NZD) Exchange Rates Climb Despite Dovish RBNZ Rate Decision
Confidence in New Zealand Dollar (NZD) exchange rates largely improved on Friday in spite of the latest deterioration in trade relations between the US and China. The ‘Kiwi’ benefitted from the relative weakness of the US Dollar, even in the wake of the previous day’s less-than-hawkish Reserve Bank of New Zealand (RBNZ) interest rate decision.
Some volatility could be in store for NZD exchange rates at the start of the week as New Zealand finance minister Grant Robertson and incoming RBNZ Governor Adrian Orr sign the new Policy Targets Agreement.