Sterling enjoyed a strong day on the currency market yesterday as sentiment towards the UK currency remained strong, and a series of external factors compromised demand for its major currency rivals.
The Pound was boosted by news that public spending declined from £11.3 billion to £8.1 billion in October, further improving the chances of the UK government beating its budget forecast this year. The government has borrowed -8%, or -£15 billion, less so far this financial year than it had at this stage 12 months ago.
Sterling also benefitted from some encouraging data from the Confederation of British Industry – more commonly referred to as the CBI – showing that Manufacturing orders increased by the most in 18 years during November.
GBP/CAD strikes 46-month high
The Pound to Canadian Dollar exchange rate (GBP/CAD) soared to a 3.5-year high 0f 1.6987 yesterday as a dovish Central Bank weighed on the ‘Loonie’.
The IMF released a report earlier this week suggesting that the Bank of Canada could be persuaded to hike interest rates in 2014, but sentiment towards the North American currency slumped when BoC Governor Stephen Poloz reiterated that slack in the domestic economy paired with below-target inflation meant that interest rates are likely to remain at the current level of 1.0% for an extended period of time.
GBP/AUD close to 3-year high
Sterling smashed its way to a two-cent gain against the Australian Dollar yesterday as fears of an imminent end to US stimulus significantly dampened investors’ appetite for risk. GBP/AUD is now over 3.5 cents stronger than it was two days ago
During the Federal Reserve’s FOMC Minutes report it emerged that the US Central Bank is very close to tapering its $85 billion asset purchasing scheme, which brings down the yield on US debt and subsequently makes borrowing significantly cheaper for investors. When QE3 is wound down the perceived high-risk Australian Dollar is liable to depreciate as speculative traders find it harder to fund investments denominated in AUD.
Pound strong versus Euro and US Dollar
The Pound maintained its recent strength against both the Euro and the US Dollar yesterday as data from both regions reflected softly on their economic prospects.
The single currency was impaired by a deceleration of private sector output in the currency bloc, as the Eurozone Composite PMI fell from 51.9 to 51.5 in November. Whilst the US Dollar was impacted by an unexpected slide in the Philadelphia Fed Business Outlook index from 15.0 to 6.5.
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