Pound Muted against Euro and US Dollar as BoE Warns of Downside Risks

Pound (GBP) Dips on BoE Comments, Pound to US Dollar and Euro in Narrow Range

The Pound (GBP) trended lower through yesterday’s trading session, but the Pound to US Dollar exchange rate held.

This followed comments from Bank of England (BoE) Governor Andrew Bailey that pressured Pound exchange rates.

Speaking at an online webinar hosted by the European Commission, Bailey warned that the risks to the UK’s recovery are ‘very much on the downside’ due to ‘unprecedented uncertainty’ from the coronavirus pandemic.

Further limiting the appeal of Sterling on Thursday were also ongoing concerns over Brexit, as headlines suggested the UK and EU remain deadlocked on a small number of key issues in trade talks.

Potentially offering the Pound a break from Brexit this morning is the UK’s latest monthly GDP release. Will a rebound in growth in the three months to August offer some support to Sterling through today’s session?

While the three months to August revealed growth, lower-than-expected August growth at 2.1%, weaker than the 4.6% forecast, raised some concerns among investors.

Support in GBP appears limited as the Pound Euro exchange rate is slipping but the Pound to US Dollar continues to remain subdued.


Euro (EUR) Muted as ECB Minutes Highlight Inflation Concerns

The Euro (EUR) was left on the back foot on Thursday in response to the minutes from the European Central Bank’s (ECB) September policy meeting.

These highlighted the ECB’s concerns over the lack of inflationary pressure in the Eurozone, with members in agreement that ‘ample stimulus remains necessary’.

In the absence of any notable Eurozone data releases today, the focus for EUR investors is likely to turn back to Europe’s fight against the coronavirus, potentially leading to some weakness in the single currency as the second wave shows no signs of slowing.

However, the Euro to US Dollar exchange rate is benefitting from USD weakness so far this morning. On top of this, the EUR/GBP exchange rate is also slightly trending higher, with the Pound to Euro exchange rate dipping to €1.09.


US Dollar (USD) Flat as US Jobless Claims Disappoint

The US Dollar (USD) was mostly directionless through yesterday’s trading session after the latest US jobless claims printed above expectations.

An increase of 840,000 last week stokes concerns over a lack of progress in the US labour market, with jobless claims having almost completely stalled since mid-August.

Looking ahead, a lull in USD data today will likely see US election uncertainty potentially stir up some volatility in the US Dollar ahead of the weekend.


Canadian Dollar (CAD) Buoyed by Uptick in Oil Prices

The Canadian Dollar (CAD) trended higher on Thursday, with the commodity-linked currency appreciating in line with a 2% jump in oil prices.

Coming up today, the ‘Loonie’ could attempt to extend its recent gains if Canada’s latest jobs figures report that the unemployment rate fell below 10% last month.


Australian Dollar (AUD) Struggles as RBA Warns of Business Failures

The Australian Dollar (AUD) traded narrowly overnight on Thursday, with the currency struggling to find support after the Reserve Bank of Australia’s (RBA) Financial Stability Review warned that business failures look set to rise ‘substantially’.


New Zealand Dollar (NZD) Buoyed by Upbeat Chinese PMIs

The New Zealand Dollar (NZD) trended higher in overnight trade as a stronger-than-expected Chinese services PMI bolstered the appeal of the ‘Kiwi’.

Matthew Andrews

Contact Matthew Andrews