Today’s Exchange Rate News: Pound Poised to Plunge if BoE Alludes to Possibility of Negative Interest Rates

Pound (GBP) Undermined by Weak Inflation

The Pound (GBP) drifted lower yesterday in the wake of the UK’s latest consumer price index as inflation was shown to have slowed to a four-year low last month.

This left investors wary of Sterling ahead of today’s rate decision by the Bank of England (BoE).

With the UK economy under considerable strain from the worst coronavirus outbreak in Europe, the BoE is widely expected to make efforts to support the recovery through an expansion of its quantitative easing programme.

However, the focus for GBP investors will be on the BoE’s stance on unconventional monetary policy amid speculation the bank is looking at negative interest rates.

Euro (EUR) Sinks on ECB Comments

The Euro (EUR) was left on the defensive yesterday following comments from European Central Bank (ECB) Vice President Luis de Guindos.

Discussing the EU’s €750bn coronavirus recovery fund, De Guindos argued that aid for countries in a weaker fiscal position should be distributed via grants rather than loans, with EUR investors wary about how this would place more of the financial burden on the wealthy northern states.

In the absence of any notable Eurozone data releases it’s likely we may see the Euro struggle to recoup its losses today.

US Dollar (USD) Rises amid India-China Tensions

The US Dollar (USD) strengthened against the majority of its peers on Wednesday as tensions in Asia saw investors favour the safe-haven currency.

This came amid concerns over a recent clash between Indian and Chinese troops in a disputed Himalayan border area, with Indian Prime Minister Narendra Modi warning the deaths of at least 20 Indian soldiers ‘will not be in vain’.

USD investors will be focused on last week’s initial jobless claims report today. Will another sizable increase in unemployment put pressure on the US Dollar?

Canadian Dollar (CAD) Muted as Canadian Inflation Misses

The Canadian Dollar (CAD) was mostly rangebound on Wednesday after Canada’s latest CPI figures revealed the country suffered another month of deflation in May.

Australian Dollar (AUD) Slumps on Abysmal Employment Data

The Australian Dollar (AUD) came under pressure overnight on Wednesday on the back of some abysmal domestic jobs figures as unemployment was shown to have rocketed to 7.1% in May, its highest level since October 2001.

New Zealand Dollar (NZD) Slips on Weaker-Than-Expected GDP Figures

The New Zealand Dollar (NZD) also trended lower overnight, with the appeal of the ‘Kiwi’ dented by a larger-than-expected contraction of domestic GDP in the first quarter.

Matthew Andrews

Contact Matthew Andrews