The British Pound to Australian Dollar (GBP/AUD) exchange rate recorded gains on Friday while the British Pound to New Zealand Dollar (GBP/NZD) and British Pound to Canadian Dollar (GBP/CAD) exchange rates softened.
The Australian Dollar was offered little support when Goldman Sachs joined the list of banks cutting iron ore forecasts. Predictions have edged down from $80 to around $66 in 2015–another unfavourable development for the ‘Aussie’ exchange rate.
The Pound has been trending lower after the Bank of England’s (BoE) unanimous vote on interest rate hikes emerged.
The Canadian Dollar could have an interesting day today with the release of Canada’s Consumer Price Index (CPI).
Earlier… The British Pound to Australian Dollar (GBP/AUD), New Zealand Dollar (GBP/NZD) and Canadian Dollar (GBP/CAD) exchange rates were all trending higher in the early part of Thursday’s European session after a heavy day of Sterling losses on Wednesday.
After the Bank of England (BoE) announced that the Monetary Policy Committee was united in its view to not raise interest rates, investors began to price in later-than-forecast UK interest rate hikes.
Economist George Buckley commented: ‘With the bank not willing to look through the weakening in headline inflation and with further falls likely… we have moved our view out for the first hike in interest rates substantially.’
Earlier… The British Pound The British Pound to Australian Dollar (GBP/AUD) and New Zealand Dollar (GBP/NZD) exchange rates continued to trend lower, while the Pound to Canadian Dollar (GBP/CAD) exchange rate rocketed +1.32% after the Bank of Canada (BOC) cut interest rates.
The surprise move came as forecasts for Canada’s inflation outlook were slashed following an approximate 60% decline in oil prices in the last six months. The cash rate was cut from 1.0% where it’s remained for the past four years, to 0.75%.
The central bank stated: ‘The oil price shock increases both downside risks to the inflation profile and financial stability risks. [The rate cut is] intended to provide insurance against these risks.’
No Bloomberg economists had forecast the rate cut.
Economist Sal Guatieri commented: ‘It’s a shocker. It is an aggressive move. It speaks volumes about where the Bank of Canada sees the economy and inflation going.’
Earlier… The British Pound began Wednesday’s European session trending lower against the Australian Dollar (GBP/AUD), Canadian Dollar (GBP/CAD) and New Zealand Dollar (GBP/NZD) after the release of Bank of England (BoE) meeting minutes.
The BoE minutes showed that a divergence of votes among the Monetary Policy Committee (MPC) didn’t occur for the fifth month running; instead, policymakers voted unanimously that interest rate hikes should remain off the cards and that the bank rate should be left unchanged at 0.50%.
The minutes stated: ‘They [two policymakers who previously voted in favour] noted the risk that low inflation might persist for longer than the temporary factors implied and concluded that this risk would be increased by an increase in Bank Rate at the current juncture.’
Meanwhile, UK Unemployment fell more than forecast from 6.0% to 5.8%. The fall would have offered the British Pound exchange rate some support if the minutes had shown that hawks Ian McCafferty and Martin Weale had remained in favour of rate hikes.
Meanwhile, the New Zealand Dollar softened against other currency majors after New Zealand’s Consumer Price Index (CPI) fell for the first time since the final quarter of 2012.
The annual drop from 1.0% to 0.8% in Q4 saw investor sentiment in the ‘Kiwi’ wane. Falling inflation suggests the Reserve Bank of New Zealand (RBNZ) rate hike cycle won’t recommence as soon as some economists had forecast.
ABS Bank economist Nick Tuffley commented: ‘The RBNZ will want to be confident inflation is heading to around 2% before lifting interest rates again. We’re not explicitly forecasting any more rate increases.’
However, one bright spot for New Zealand’s economy was the 1.0% price increase at Tuesday’s Fronterra dairy auction. After dairy prices collapsed by around 50% last year, the slow rebuilding of the commodity value offers those farmers who have been affected a little support.
Meanwhile, close neighbour Australia published January’s Westpac’s Consumer Confidence Index on Tuesday, which rose from 91.1 to 93.2.
However, despite the rise, the figure didn’t recover from its tumble in December. Any ecostat below 100 shows that the number of pessimists and optimists in the economy are evenly matched.
Westpac chief economist Bill Evans stated: ‘When assessed in the context of the sharp 5.7 fall in the index in December it is not a particularly strong result. The index is still down by 9.7% on a year ago and really only back to the levels we saw in the immediate aftermath of the federal budget when the index had tumbled by 6.8%.’
BOC Interest Rate Decision Weighing on Canadian Dollar (CAD) Exchange Rate
Another commodity currency, the Canadian Dollar, has also been trending lower in the market on account of falling prices—in this instance, oil prices. As Canada’s largest export, oil and the Canadian Dollar are very closely linked.
However, today another factor is weighing on the Canadian Dollar exchange rate—the Bank of Canada (BOC) interest rate decision.
The Canadian Dollar fell to its lowest level in over five years against the US Dollar (CAD/USD) as speculation that the Bank of Canada could cut rates in Wednesday’s session increased.
The BOC will release its growth outlook which will likely have fallen given the recent drop in black gold prices.
Economist Charles St-Arnaud commented: ‘We expect the bank to be quite dovish. We know they have to incorporate the lower price of oil in their analysis.’
British Pound Exchange Rate Forecast: GBP/AUD, GBP/NZD, GBP/CAD
The British Pound is likely to fluctuate during Wednesday’s session as investors weigh the disappointing Bank of England meeting minutes against the Unemployment Rate fall.
BoE officials are also expected to speak on Wednesday and could therefore cause some British Pound movement.
Bank of Canada decisions will impact the GBP/CAD exchange rate and BOC Governor Stephen Poloz will also be holding a press conference which could allow ‘Loonie’ fluctuations.
New Zealand’s Business Performance of Manufacturing Index is scheduled for release on Wednesday while Australian Consumer Inflation Expectations are out on Thursday.
The British Pound to Australian Dollar (GBP/AUD) exchange rate is residing at 1.8454. The British Pound to New Zealand Dollar (GBP/NZD) currency pair is trending in the region of 1.9777. The British Pound to Canadian Dollar (GBP/CAD) exchange rate is hovering at 1.8269.
