Pound Sterling Exchange Rates Weaken despite Support for Higher Interest Rates from MPC’s Ian McCafferty
Pound Sterling was mostly on poor form yesterday. Recovering market risk appetite saw GBP slump versus the commodity currencies, with the pound’s only gains versus a major peer coming against the US Dollar.
This was despite the fact that traditionally cautious Bank of England (BoE) Chief Economist Andy Haldane did not say anything to dent the monetary policy outlook and hawkish Monetary Policy Committee (MPC) member Ian McCafferty claims the policymakers should not ‘dally’ when it comes to raising borrowing costs again.
It’s a busy day for UK data today, with figures covering trade, industrial production, manufacturing production and construction output all set for release. The National Institute for Economic and Social Research (NIESR) will also publish its GDP estimate for March.
GBP/EUR Exchange Rate Weakens after Hitting 14-Month High
The GBP/EUR exchange rate was stuck around opening levels yesterday, with a lack of Eurozone data failing to pave the way for a Sterling advance. With the Pound having hit its highest levels against the Euro since 7th June 2017, traders were incentivised to sell GBP in order to take profit.
A speech from European Central Bank (ECB) President Mario Draghi could see significant volatility for the Euro today.
GBP/USD Exchange Rate Advances on Trade Tensions as China Files Complaint with WTO
Markets were unsure whether the latest developments in the escalating trade tensions between the United States and China yielded a net positive or net negative result yesterday. This allowed the GBP/USD exchange rate to make strong gains.
Although Chinese President Xi Jinping gave a speech early this morning in which he suggested that tariffs would be lowered, it was also revealed that China had lodged a formal complaint with the World Trade Organisation (WTO) over the legality of the recent US tariffs on steel and aluminium imports.
As well as US consumer price data today, investors will also have the minutes of the Federal Open Market Committee’s (FOMC) 21st March policy meeting to digest.
Mixed Canadian Building Stats Fails to Slow GBP/CAD Exchange Rate Losses
The Canadian Dollar was on strong form versus the safer currencies yesterday, but lost out against its commodity-correlated brethren.
The GBP/CAD exchange rate therefore slumped, with mixed Canadian building data doing nothing to slow the progress of the ‘Loonie’.
While housing starts recorded a better-than-expected 225,200 in March, building permits fell -2.6% month-on-month in February; double the pace of decline expected.
GBP/AUD Exchange Rate Weakens 0.5% despite Australian Business Confidence Decline
The GBP/AUD exchange rate slumped yesterday, losing half a percent despite some disappointing Australian confidence data for March. The latest NAB business conditions index weakened from a downwardly-revised 20 points to 14 points, while the business confidence measure fell from 9 points to 7 points.
It looks set to be a volatile day for the Australian Dollar, given that not only do markets already have Chinese inflation data and a speech from Reserve Bank of Australia (RBA) Governor Philip Lowe to consider, but also the high-profile US data and FOMC minutes to come.
Sharp Slump for GBP/NZD Exchange Rate as Risk Appetite Supports New Zealand Dollar
Risk appetite put the New Zealand Dollar on largely bullish form yesterday, pushing the GBP/NZD exchange rate half a percent lower as markets flocked to the high yield currency.
Like the Australian Dollar, the New Zealand Dollar will be highly sensitive to the latest US developments today.