Pound Sterling Exchange Rate Plummets as Two BoE Rate Hikes Look Unlikely this Year
The release of the UK’s latest Consumer Price Index (CPI) struck a heavy blow to Pound Sterling (GBP) yesterday as it revealed inflation unexpectedly tumbled from 2.7% to 2.5% in March.
The decline prompted GBP to freefall as markets questioned the likelihood of the Bank of England (BoE) targeting up to two interest rates this year.
This downtrend may also persist today as economists forecast the UK’s latest retail sales figures will also disappoint later this morning.
Disappointing UK Inflation Undermines GBP/EUR Exchange Rate
The UK’s disappointing inflation figures proved to be the main driver of movement in the Pound Euro (GBP/EUR) exchange rate on Wednesday, despite the Eurozone’s latest inflation figures also coming in below expectations.
With the European Central Bank (ECB) unlikely to speed up its monetary tightening, even if the Eurozone’s inflation printed in line with expectations, the data proved to have much less of an impact on the Euro exchange rate.
GBP/USD Exchange Rate Strengthens as Trade War Concerns Wane
The GBP/USD exchange rate fell over a cent yesterday as easing fears of a potential trade war between the US and China prompted an uptick in market risk appetite.
This in turn helped to boost long-term US Treasury yields, which further bolstered the appeal of the US Dollar (USD) against the Pound (GBP).
GBP/CAD Exchange Rate BoC
The Canadian Dollar (CAD) appeared to be the only major currency not to advance against the Pound on Wednesday as the Bank of Canada (BoC) maintained its cautious outlook, following the latest policy meeting.
This allowed the GBP/CAD exchange rate to rebound yesterday afternoon as the BoC disappointed markets by suggesting it would remain ‘cautious with respect to future policy adjustments’.
Observers had previously suggested that robust inflation and positive progress in NAFTA negotiations may have prompted the bank to strike a more hawkish tone this month.
GBP/AUD Exchange Rate Bolstered by Rising Commodity Prices
The Australian Dollar (AUD) extended its gains against the Pound overnight on Wednesday as it was lifted by rising commodity prices as the CRB commodity index jumped over 1% to a new two-year high.
However AUD’s advance was not without its hurdles as Australia’s latest labour report suggested that employment growth is beginning to slow.
GBP/NZD Exchange Rate Hit by NZ Inflation Figures
The Pound Sterling to New Zealand Dollar exchange rate was met by heavy losses during the European session on Wednesday as the combination of a weakened GDP and a return of market risk appetite drove the pairing lower.
The ‘Kiwi’s gains were then shored up by the release of New Zealand’s latest CPI figures overnight, as first quarter inflation was shown to have picked up to 0.5%, as forecast.