Sterling (GBP)
UK Consumer Price Index (CPI) data was less-than-impressive yesterday causing the Pound Sterling to register large losses against most of its major peers. The CPI data showed that inflation had slowed from 1.9% to 1.6% in July. The pedestrian growth of inflation has been linked to summer clothing sales which drove consumer prices lower across Britain. The faltering inflation data wasn’t bad news for all, however. Bank of England Governor Mark Carney will have welcomed the slow inflationary growth as it relieved the mounting pressure to hike interest rates in the near term.
Today’s minutes from the most recent Bank of England monetary policy meeting has bolstered the Pound. With two of the nine policymakers dissenting from the majority vote to maintain the current Bank Rate, the speculation for a pre 2015 rate hike has been reignited.
Euro (EUR)
The Pound to Euro exchange rate declined through resistance levels at 1.25 yesterday, suffering a half-cent retraction as a result of the negative UK CPI data.
Today’s publication of the Bank of England minutes from their most recent monetary policy meeting has strengthened the Pound across the board. The minutes revealed that the vote to keep the interest rate at the record low 0.5% was not a unanimous one. Two of the nine policymakers opted for a 25 basis-point increase. The departure from a united vote, concerning interest rate, was the first since July 2011 and has renewed the speculation on a rate hike before the close of the year.
The result of the minutes has seen Sterling gain against the Euro, although it is still hovering around 1.25 at present.
US Dollar (USD)
Yesterday the Pound to US Dollar depreciated by over 1% in less than 8 hours. The dismal performance of the Pound saw the exchange rate dive to its lowest level since April due to a combination of poor UK inflation data, and a strong set of US domestic data.
The American Consumer Price Index hit the target 2.0% set by the Federal Reserve. US Housing Starts increased significantly by 15.7% last month. The combination of these factors had a marked influence on the ‘greenback’ (USD) gains.
The Pound to US Dollar exchange rate has appreciated since the release of the minutes.
Canadian Dollar (CAD)
The less-than-impressive UK inflation data weakened the Pound to Canadian Dollar exchange rate yesterday. GBP/CAD softened by around -0.7 cents to a new 2.5 month low.
The latest Bank of England minutes have gone a little way towards strengthening the Pound versus the ‘Loonie’ (CAD).
Australian Dollar (AUD)
The Pound to Australian Dollar exchange rate nosedived to a 4-month low yesterday following the faltering British inflation data.
The ‘Aussie’ was also bolstered from the semi-annual testimony given by the Reserve Bank of Australia (RBA) Governor Glenn Stevens. Stevens said that he doesn’t intend to lower the interest rate despite uncertainty in the outlook of Australian economic growth.
New Zealand Dollar (NZD)
The New Zealand Dollar depreciated across the board during the Asia Pacific session yesterday as a result of a statement from the Reserve Bank of New Zealand (RBNZ). The RBNZ slashed its 2014 Gross Domestic Product forecast from 4.0% to 3.8%. The current account estimate was also reduced from 372 million to 297 million. The revisions were interpreted as an increased likelihood of delayed interest rate hikes.
South African Rand (ZAR)
Today has been a little more positive, in terms of inflation rate data, for the South African Rand. Year-on-year inflation has declined from 6.6% to 6.3%, although expectations were of a drop to 6.08%. The overall declination is a good sign that inflation is heading towards the target set by the South African Reserve Bank, but the figure is still far above comfort levels.
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