Pound Sterling to Euro (GBP/EUR) Exchange Rate Falls, GBP/USD Rises
May’s British Retail Consortium (BRC) shop price index did not offer Pound Sterling (GBP) exchange rates any particular cause for confidence yesterday, contracting -1.1% on the year.
This was the index’s weakest reading since January 2017, suggesting that the inflationary pressure on prices that followed the Brexit vote is continuing to ease. As a result, the odds of the Bank of England (BoE) opting to raise interest rates before the end of 2018 diminished further, to the detriment of GBP exchange rates.
As forecasts point towards a sharp increase in net consumer credit on the month Sterling looks vulnerable to additional losses. That being said, the GBP/USD exchange rate was able to strengthen as US data disappointed expectations.
Euro (EUR) Exchange Rates Bolstered by German Inflation Data
While a significant degree of uncertainty continues to hang over Italy’s future, the mood towards Euro (EUR) exchange rates still recovered yesterday.
This was largely due to better-than-expected ecostats from Germany. The Euro gained on the Pound (EUR/GBP) and US Dollar (EUR/USD) as May’s unemployment rate and consumer price index both surprised to the upside, with unemployment falling to a fresh post-reunification low of 5.2%.
As inflation leapt to 2.2% on the year, meanwhile, this fuelled hopes that the European Central Bank (ECB) could adopt a more hawkish outlook in the coming months.
A similarly strong showing from the Eurozone consumer price index could see EUR exchange rates extending their recovery further.
US Dollar (USD) Exchange Rates Ease Lower, GDP Revised
Disappointment greeted the latest raft of US gross domestic product data, with the annualised growth rate unexpectedly slowing from 2.3% to 2.2%. Coupled with weaker personal consumption expenditure figures this painted a less encouraging picture of the US outlook, suggesting that the economy is less healthy than previously thought.
As this softer data could damage the odds of the Federal Reserve pursuing a more aggressive pace of monetary tightening, USD exchange rates naturally trended lower.
If April’s personal consumption expenditure core reading fails to impress then the US Dollar looks set to remain under pressure.
Canadian Dollar (CAD) Exchange Rates Climb after BOC Rate Decision
Investors were not surprised that the Bank of Canada (BOC) opted to leave interest rates on hold once again at its May policy meeting.
Even so, the Canadian Dollar was encouraged to push higher against many of the majors in the wake of the announcement. CAD exchange rates strengthened in response to the more confident tone of policymakers, even though the prospect of another rate hike remains distinctly distant.
Today’s Canadian gross domestic product data could spur further gains for the Canadian Dollar – providing growth remains strong.
Risk Aversion Eases, Australian Dollar (AUD) Exchange Rates Gain
Australian Dollar (AUD) exchange rates recovered some ground on Wednesday as risk aversion eased slightly.
While Australian building approvals saw a sharper than forecast contraction on the month, this failed to particularly weigh on AUD exchange rates.
Weaker-than-forecast US growth also lent support to the commodity-correlated currency.
Even so, a weaker private sector credit figure could leave AUD exchange rates on a softer footing today.
New Zealand Dollar (NZD) Exchange Rates Tick Higher
The latest Reserve Bank of New Zealand (RBNZ) Financial Stability Report provoked little reaction from New Zealand Dollar (NZD) exchange rates. As the RBNZ maintained a cautiously optimistic view of the domestic outlook, investors saw no reason to reassess the odds of the central bank returning to a tightening bias.
However, as the general sense of market risk appetite picked up in response to disappointing US growth data, the New Zealand Dollar pushed higher across the board.