GBP: Sterling Dips despite UK Retail Sales Rebound
Sterling began this morning with some relatively good news, as the summer temperatures were demonstrated to have significantly boosted the sales of clothing and thus retail sales. It did not take long, however, for the Pound to pare these gains as the European Central Bank meeting looms.
The month-on-month quantity of goods sold both online and in store increased by 0.6%, far more than the forecast of 0.4% and indeed last month’s -1.1%.
This second quarter rebound may nonetheless do little to dissipate anxieties for the long-term outlook of spending, as inflation levels exceeding wage growth continues to put household budgets under pressure.
With that being it for significant data today, the near-term forecast for Sterling will be somewhat dependent on today’s European Central Bank meeting. Should the meeting end up providing a semblance of support for the Euro, then it is possible that traders will switch to the single currency.
GBP/EUR: Pound Euro Fluctuates as all Eyes Turn to ECB Meeting
The Pound Euro exchange rate has fluctuated this morning as markets anticipate the imminent ECB meeting.
Whilst economists do not expect any form of interest rate change (the benchmark is predicted to remain at 0.00%), there are murmurings that the ECB will mention changing sentiment towards the tapering of its bond-buying scheme, with an official announcement expected in September or October. Should this materialise then the Pound Euro exchange rate will likely come under even more pressure.
ECB President Mario Draghi will also be holding a press conference this afternoon that will be carefully scrutinised for any form of hawkish or dovish regard.
GBP/USD: US Dollar Surges as Bank of Japan Proves Dovish
The US Dollar made some hasty gains this morning after the Bank of Japan (BoJ) took a dovish stance at its latest policy meeting, quashing the upside potential of the Yen and causing safe-haven investors to quickly switch to the ‘Greenback’.
Additionally, decreasing market risk appetite – as investors sell out of the Australian and New Zealand Dollars – has proven of great benefit to the recently struggling US Dollar as it attempted to shake off the tribulations of the Republican’s health care bill failing to pass.
The positive UK retail sales figures this morning did help bolster the Pound, but they remain negligible in the wake of the US Dollar’s surge.
The forecast for this pairing remains dictated by the future policy stances of the Federal Reserve and the Bank of England (BoE), and of note today; the Philadelphia Fed business outlook index is expected to weaken – an indicator that could very well leave Sterling with the opportunity to claw back some gains.
GBP/CAD: Canadian Dollar Strong after US Oil Supply Drop
The Pound to Canadian Dollar exchange rate dropped recently due to yesterday’s news that US oil inventories fell more than anticipated in the week ending July the 14th. Whether this rally will continue for the commodity-correlated ‘Loonie’ is, however, another question, as tomorrow Canadian inflation figures are due, with forecasts predicting the year-on-year rate to have fallen from 1.3% to 1.1%. This could be enough to provide Sterling room to climb, although despite inflation running below target for the Bank of Canada (BoC), many economists are still pricing in additional rate hikes.
Daniel P Hui at JP Morgan stated on the subject:
‘In Canada, despite inflation running even lower than target and a positive, rather than negative output gap, markets are now pricing in one more BoC hike […] in the coming two years.’
GBP/AUD: Pound Australian Dollar Limited by Recent Positive RBA Minutes
The Pound to Australian Dollar exchange rate remains limited after the recent release of the Reserve Bank of Australia’s meeting minutes, which still propels the ‘Aussie’ Dollar.
Investors discovered that the RBA estimates interest rates will need to be at 3.5% to support a healthy economy, far higher than the present official cash rate; a clear suggestion that monetary policy might tighten in the coming months provided the economic data proves strong enough.
On the subject of data, today saw the release of Australia’s employment figures which demonstrated that the number of newly-employed people decreased from May’s 38.0k to 14.0k in June. This is, however, still a high number, with May’s 38k increase being extremely sizable.
Despite dropping against most of the majors in response, the ‘Aussie’ Dollar has, so far, remained within a relatively narrow band against Sterling. This may imminently change however if the ECB meeting turns hawkish and investors drop the Pound in favour of the Euro.
GBP/NZD: Pound New Zealand Dollar Continues to fall
The Pound to New Zealand Dollar exchange rate fell by roughly half a cent yesterday and continued in its descent this morning despite the positive UK retail sales figures.
The dairy-correlated ‘Kiwi’ has fluctuated recently, notably after some disappointing inflation figures, but the boost in dairy prices that resulted from this week’s dairy auction still managed to propel it against the struggling Pound.
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