Markets were not encouraged by the more dovish tone of the Bank of England (BoE) yesterday, leaving the Pound (GBP) trending lower against rivals ahead of the weekend as ‘Brexit’ fears mounted.
Pound Sterling (GBP) Extends Slump Today after BoE Dovishness
The appeal of the Pound (GBP) has been dented further in the wake of the Bank of England’s (BoE) latest policy meeting and inflation report as policymakers proved decidedly dovish. In something of a surprise the Monetary Policy Committee (MPC) voted unanimously in favour of leaving interest rates unchanged, as sole dissenting hawk Ian McCafferty ceased pushing for a modest immediate rate hike. Traders were largely discouraged by this move as the likelihood of the central bank embarking on a fresh cycle of monetary tightening seemed to decrease sharply, with some economists suggesting that a rate hike was now unlikely to come before 2017.
With the ‘Brexit’ debate equally weighing on demand Sterling looks set to remain soft going into the weekend as investors lack sufficient incentive to buy back into the ailing currency.
US Dollar (USD) Exchange Rate Trending Higher Ahead of Non-Farm Payrolls Data
It has equally not been a great week for the US Dollar (USD), however, as domestic data has proved persistently disappointing. Adding to the bearishness were unexpectedly sharp contractions in domestic Factory Orders and Durable Goods Orders, which indicated a general weakening in demand within the world’s largest economy. With the wider global slowdown appearing to be exerting a greater drag on the US in the wake of December’s Fed interest rate hike, the impetus for the Federal Open Market Committee (FOMC) to vote for another increase seems to be diminishing.
January’s Non-Farm Payrolls report may still prompt a resurgence for the weakened ‘Greenback’ today, as strong growth in employment had been part of what convinced the FOMC to begin monetary tightening last year. Should the jobs market continue to show robustness the Fed could return to a more hawkish stance in the near future, stoking hopes that another interest rate hike may come sooner rather than later.
Euro Currency News: EUR Shrugs off Suggestions of Greater ECB Easing
In spite of recent Eurozone data failing to demonstrate any particular strength, with contraction evidenced by the latest Retail PMIs and German Factory Orders reports, the single currency (EUR) has been on a bullish run. For the most part the Euro has been benefitting from its negative correlation with the US Dollar, with investors also less than inclined to put stock in the dovish comments of European Central Bank (ECB) President Mario Draghi. Although the central bank appears to be on course to introduce further monetary loosening in March, when notable hawk Jens Weidmann of the Bundesbank will be absent from voting, markets remain unwilling to pay heed to the possibility as yet.
Current GBP, USD, EUR Exchange Rates
At the time of writing, the Pound Sterling to US Dollar (GBP/USD) exchange rate was slumped around 1.4538, while the Pound Sterling to Euro (GBP/EUR) pairing was trending lower at 1.2993. Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate was on a downtrend in the region of 1.1190.
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