GBP Falls against USD and CAD after Consumer Price Index Disappointment
While UK CPI accelerated to its fastest pace since January 2015, the still minimal 0.3% growth has simply highlighted the poor state of UK inflation. The data means that UK inflation has now remained far below the Bank of England’s (BoE) target rate of 2% for two full years and it is this that investors are focusing on, rather than the positive short term news. As a result Pound Sterling has sunk deep into negative territory against the US Dollar and Canadian Dollar.
UK Officials Hopeful that Cameron and Hollande Reached an Accord
One major opponent of the UK’s proposed economic reforms, French President Francois Hollande, may have reached an agreement with David Cameron during talks last night. According to official sources, Hollande accepted Cameron’s assurances that those countries outside the Eurozone wouldn’t act to prevent countries within the currency bloc from protecting their own interests.
Yesterday…
David Cameron on EU Reforms: ‘Nothing is agreed until everything is agreed’
David Cameron has cancelled an open debate with the European Parliament on Tuesday in order to meet EU leaders face to face to make his case for reforms. British officials are hoping a deal will be reached at the Brussels summit taking place this Thursday and Friday.
Earlier…
A claim that UK banks do not have the necessary financial buffers in place to weather a financial shock has weakened Pound Sterling exchange rates. Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Canadian Dollar (GBP/CAD) have been softened by global recession worries, while a strong defence of policy from a top Fed official has strengthened the US Dollar and the Canadian Dollar remains strong as oil prices climb.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Weak on UK Banking Fears
With new volatility on the global stock markets causing fears of another financial crisis, Pound Sterling has been softened by claims from a former Bank of England (BoE) chief economist regarding the security of UK banks. Sir John Vickers, the man who led the Independent Commission on Banking (ICB) has said that the BoE has implemented a weaker plan than the one recommended by the ICB.
The ICB had recommended that UK banks hold a capital buffer of 3% to ensure they had the funds in place to cover the kinds of losses that might arise in the event of another market crash. The BoE’s current policies do not require this level of capital, with the Countercyclical Capital Buffer (CCB) currently at 0% for UK lending.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trading down -0.2%, with the ‘Greenback’ helped by comments from New York Fed President, William Dudley, on the health of the US economy. Dudley has dismissed US recession risks, stating that the biggest threat to the US economy is from outside shocks, not internal problems.
UK Consumer Price Index figures are due out tomorrow, while the Fed’s Patrick T. Harker will be speaking at the University of Delaware.
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Slumps as Oil Prices Rise
A minor recovery for Brent and WTI crude oil, as well as the prospect of higher government spending, has helped to boost the Canadian Dollar today. The rise in crude oil is a continuation of the rally that was triggered on Friday thanks to comments from the United Arab Emirates Energy Minister, who suggested that the Organization of Petroleum Exporting Countries (OPEC) could be willing to collaborate in order to cut prices. According to Reuters, Nigeria’s oil minister has said that OPEC sentiment was becoming more strongly aligned in favour of cutting prices. Russia has also called for improved relations between Iran and Saudi Arabia.
Additionally, the ‘Loonie’ has been strengthened by comments from Prime Minister Justin Trudeau, who has backtracked on the Liberal party’s plans to ‘balance the books’ by the end of their four-year term in government. The government will instead run deficits in excess of CAD$10 billion in order to boost infrastructure and help the Canadian economy diversify and recover.
Canadian Existing Home Sales figures are due for release tomorrow.
Current GBP, USD, CAD Conversion Rates
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trading in the region of 1.4482, while the US Dollar to Pound Sterling (USD/GBP) exchange is currently trending around 0.6906.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trading in the region of 2.0013, while the Canadian Dollar to Pound Sterling (CAD/GBP) exchange is currently trending around 0.4991.
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