Pound Sterling (GBP)
Tuesday morning has seen the publication of the UK consumer price index, which is a key measure of inflation. The market consensus of 1.5% was equalled, although the actual data is still a decline from the previous score of 1.6%. Given that the Bank of England has set an inflation target of 2.0%, the data will be mostly negatively received.
It is likely that the Pound will trend low against its major rivals as the decline in inflation makes it increasingly unlikely that the Bank of England will hike rates in the near-future.
Euro (EUR)
The Pound Sterling to Euro exchange rate was unable to breach psychological support at 1.26 on Monday. However, speculation that the European Central Bank could embark on a full-scale asset purchasing scheme heightened after crude oil prices declined to a 27-month low.
Chinese data may seem far removed from the ECB’s stance on monetary policy, but the weekend’s Chinese industrial production data hit a 6-year low which caused crude oil prices to plummet, and fuel prices play a significant part in Europe’s consumer price indexes. With oil prices on a downtrend there is the possibility that Eurozone inflation could slide further in the coming months. If that proves to be the case it is likely that the ECB will have to act which could severely weaken the single currency.
US Dollar (USD)
A mixed set of American economic data publications on Monday saw ‘Cable’ (GBP/USD) fluctuate within a narrow range. The US empire manufacturing survey reached its highest level since 2009 at 27.54, however, a separate report which measures factory output across the country contracted by -0.4%, taking it to an 8-month low.
With a number of highly influential economic events over the coming week traders generally opted to spectate on Monday rather than participate, and the Pound to US Dollar exchange rate subsequently flat lined.
Canadian Dollar (CAD)
Positive Canadian data on Monday helped the Pound to Canadian Dollar exchange rate depreciate by around -0.8 cents, completely reversing the gains made last Friday. Canadian existing home sales increased from 0.8% to 1.8% which aided the ‘Loonie’ (CAD) uptrend, but the primary reason for the Pound to Canadian Dollar decline was speculation that Tuesday morning’s British inflation data may result in the BoE holding off from raising interest rates anytime soon. Given that the data showed inflation to be moving away from the target 2.0%, that speculation may become fact.
Australian Dollar (AUD)
The weekend’s 8-month low Chinese industrial production figure caused Sterling to register slight gains against the Australian Dollar on Monday. The negative Chinese data indicated that demand for Australian mining exports will continue to wane over the coming months reducing the appeal for the commodity-sensitive ‘Aussie’ (AUD).
Tuesday morning saw the release of the Reserve Bank of Australia’s recent meeting minutes. The minutes suggested that the RBA expects the Australian economy to continue to grow at an above average pace. They also outlined that rate revisions will be subject to changes in the housing market, and they are willing to lift interest rates if the housing market overheats. The generally hawkish tone of the minutes has helped the ‘Aussie’ notch up slight gains against many of its rivals.
New Zealand Dollar (NZD)
The Pound Sterling to New Zealand Dollar exchange rate softened on Monday as traders contemplated the potential implications of several significant British economic events over the coming week.
Given that crude oil prices have declined massively it is unlikely that the New Zealand Dollar will be able to sustain any gains against the majority of its major peers.
South African Rand (ZAR)
The Pound is trending lower against the South African Rand on Tuesday after British inflation data indicated that the Bank of England may have to hold rates for the foreseeable future. Whilst the Consumer Price Index was equal to the market consensus of 1.5%, this is still a drop from the previous figure of 1.6% which shows inflation to be moving away from the 2.0% target set by the BoE.
With nothing in terms of South African economic data on Tuesday, changes for the Rand will most likely be dictated by foreign currency movement. If traders opt to hold off on investing in the US Dollar ahead of the Federal Reserve’s interest rate decision, the Rand could potentially notch us some gains against many of its competitors.
