- UK GDP Prints as Forecast – Investors hope for accelerated growth in Q3/4
- Fed Hints at Possible June Hike – US Dollar appetite improves on Fed optimism
- German Unemployment Optimistic – Joblessness down-16k, unemployment rate stable.
- Forecast: German CPI, US GDP – Thursday’s session sees key reports released
Pound Sterling Exchange Rate Dips from Best Levels on Slowing UK Growth
GBP UPDATE: The Pound suffered a definitive loss against the Euro on Friday as traders of the shared currency reacted bullishly towards Eurozone unemployment and GDP. Meanwhile the Pound continued its slow-but-gradual gains against the US Dollar as Friday’s US data failed to impress.
Earlier…
Pound traders were relieved yesterday as Britain’s key Gross Domestic Product (GDP) didn’t disappoint as some analysts feared.
The latest score released by the Office for National Statistics (ONS) revealed that growth slowed as forecast from 0.6% to 0.4% in Q1 2016. The report noted that while some businesses were reluctant to expand due to the uncertainty of the upcoming EU referendum, or the possibility of a ‘Brexit’, figures printed largely as expected. The year-on-year print, on the other hand, printed better-than-expected, holding at healthy 2.1% growth despite being predicted to slow to 2.0%. Despite this, the Pound still posted modest losses against several of its peers.
Analysts suggested that UK growth would accelerate later in the year, but Sterling’s current rally slowed with investors now calming after responding positively to the latest EU referendum polls. The Pound was little changed on Thursday morning after house price data revealed a worse than expected yearly score of 4.9%.
US Dollar (USD) Supported by FOMC Policy Statement
Investor appetite for the US Dollar improved yesterday as the Federal Reserve indicated that a rate hike was possible in June. As investors had previously anticipated there may not be another hike until Q3, this strengthened the ‘Greenback’.
The Federal Open Market Committee (FOMC) meeting saw policymakers freezing rates at 0.25%, and as before cited slow global growth and domestic inflation pressures as the reason for the dovish movement. Interestingly, the Fed also cited a potential ‘Brexit’ as an obstacle for the US economy due to the UK being a long-term ally of the US and the ripple effects a ‘Brexit’ could have on the Eurozone (one of the primary US trade partners).
Another slew of US data is due this afternoon, including GDP and personal consumption reports. If growth slows as vastly (or more vastly) than expected, it could weigh on the US Dollar’s currently-improved sentiment.
Euro Boosted by Rising German Confidence
The Pound Sterling to Euro (GBP/EUR) exchange rate was unable to sustain any gains yesterday as the Pound’s rally slowed to an apparent stop. The slowing was largely due to an increase in German consumer confidence, with yesterday’s GfK report printing a score of 9.7, up from 9.4. The increase in confidence from the Eurozone’s biggest economy indicated that the ECB’s easing methods were not having a negative effect on German consumers, restoring confidence in the Euro slightly.
This was despite news that issues from Greece were rearing their heads once more, with disagreements between the Greek government and lenders rising due to difficulty meeting bailout targets.
Investors have their eyes set on German unemployment, which showed a large unemployment decrease of -16k and a steady unemployment rate of 6.2%, as well as the nation’s Consumer Price Index (CPI) today, with CPI predicted to have lowered – a result that could dent investor confidence.
Australian Dollar (AUD) Exchange Rate Falls on Slowing Inflation
Bearish Australian Consumer Price Index (CPI) reports released yesterday left the Australian Dollar (AUD) undermined and battered, with the Pound taking a huge three-cent gain over it in Wednesday’s session alone.
GBP/AUD reached a new six-week-high after estimates that quarterly CPI would merely slow from 0.4% to 0.2% instead printed a surprising contraction of -0.2%. The year-on-year print also slowed considerably to 1.3%, despite forecasts that it would hold at 1.7%.
Due to recent warnings of Australian Dollar overvaluation from the Reserve Bank of Australia (RBA), this news weighed heavily on ‘Aussie’ favour as it indicated that rate cuts may be possible in the near future.
New Zealand Dollar Surges on RBNZ Interest Rate Announcement
The volatile GBP/NZD exchange rate suffered a large -250 pip drop on Wednesday’s session after the Reserve Bank of New Zealand’s (RBNZ) latest rate decision proved to be surprisingly hawkish.
While investors had expected policymakers to hint at future stimulus and cuts, the RBNZ instead froze rates and remained optimistic about the nation’s current monetary policy, improving ‘Kiwi’ sentiment.
Canadian Dollar (CAD) Rises on Oil Price Recovery
The Pound to Canadian Dollar pair slipped yesterday as oil prices recovered once more from a fall earlier in the day. This was likely due to investors anticipating the Federal Reserve’s latest policy decision announcement. However, this was also further evidence of the current unpredictable nature of oil prices as they had dropped mere hours before on US data that crude oil inventories had reached a record high.
Comments are closed.