Exchange Rate News: Euro Slides as ECB Hawk Announces Early Departure

Pound (GBP) Remains on the Back Foot Thanks to Political Worries

Support for the Pound remained limited yesterday as political anxiety continued to hang over the UK outlook.

As Boris Johnson resisted calls for his resignation, doubling down on controversial rhetoric in the process, investors saw little reason to favour the Pound. The lingering threat of an early general election also kept a dampener on GBP exchange rates as worries over the economy’s resilience persist.

Sterling has extended declines this morning despite the UK’s GfK consumer confidence index improving from -14 to -12.

GBP exchange rates are likely to remain on a downtrend heading into the weekend.

Surprise Resignation of ECB Hawk Drives Euro (EUR) Lower

Although the latest German GfK consumer confidence index showed a surprise uptick on the month this failed to offer the Euro any support.

Focus instead fell on the unexpected early resignation of European Central Bank (ECB) policymaker Sabine Lautenschläger, the institution’s most senior German official. As Lautenschläger has proved one of the more hawkish ECB policymakers her departure raises the risk of the central bank delivering further monetary loosening before the end of the year.

If today’s series of Eurozone confidence indexes show a decline in sentiment the Euro could come under further pressure.

Home Sales Rebound Fails to Shore up US Dollar (USD) as Risk Appetite Improves

A smaller-than-expected widening of the advance goods trade deficit and a rebound in domestic home sales were not enough to give USD exchange rates a boost yesterday.

With market risk appetite picking up on hopes of progress towards a US-China trade agreement the safe-haven US Dollar found itself lacking support.

A contraction in August’s durable goods orders figure may add to the current weakness of USD exchange rates.

Falling Business Barometer Caps Canadian Dollar (CAD)

As the CFIB business barometer dipped from 60.6 to 54.3 in August, delivering a second month of decline, support for the Canadian Dollar eased.

CAD exchange rates could record further losses if oil prices maintain their current downtrend.

Potential US-China Progress Lifts Australian Dollar (AUD)

Hopes that US China trade relations could see an improvement sooner rather than later helped to shore up the Australian Dollar yesterday.

As the US sounded a more optimistic note on the prospect of a deal AUD exchange rates were buoyed by a general increase in market risk appetite.

As long as this sense of market optimism persists AUD exchange rates may stand firm heading into the weekend.

RBNZ Comments Boost New Zealand Dollar (NZD) Exchange Rates

Fresh comments from Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr helped to shore up the New Zealand Dollar yesterday.

As Orr indicated that the central bank is ‘unlikely to need unconventional monetary policy tools’ this gave investors cause for confidence, even though the prospect of further interest rate cuts remains on the table.

September’s ANZ consumer confidence index may dent the New Zealand Dollar, though, with forecasts pointing towards a decline.

NZD held on to gains against the Pound despite New Zealand’s ANZ Consumer Confidence index falling from 118.2 to 113.9.

Louisa Heath

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