The Pound inched away from the 1.5 year high it achieved yesterday against the Euro as data showed that the UK’s trade balance widened unexpectedly last month.
Sterling was still trading firmer against the weakened Euro as the markets continued to process yesterday’s European Central Bank policy meeting.
The single currency was weakened after ECB policy makers cut the Eurozone’s interest rate to a new record low level of 0.15%. The move spurred investors to look elsewhere for higher returns on their cash and as such currencies such as the Australian Dollar benefited from the inflows.
The Euro was weakened further today after ECB Governing Council member Ewald Nowotny said that inflation is massively below the ECB’s target.
“If you have a central bank that’s moving toward more easing like the ECB it just gives another green light towards the high-yield market. If we look back at what huge amounts of easing from various central banks have done in recent years it has promoted asset-price inflation and confidence into high-yield markets,” said Jane Foley, senior currency strategist at Rabobank International.
Despite yesterday’s drop the Euro is still trading stubbornly high. One of the ECB’s main objectives yesterday was to weaken the currency in order to assist the regions struggling exporters. Instead the Euro is still holding ground.
The Pound softened against the US Dollar earlier in the session before clawing back ground after a report showed that the UK’s trade deficit widened in April as exports fell.
The Office for National Statistics said the U.K.’s trade in goods deficit was £8.9 billion ($14.9 billion) in April. That is up from £8.3 billion in March and wider than economists’ expectations that the goods trade deficit was £8.7 billion.
If the afternoons anticipated US jobs data comes in strongly then we forecast that the Pound will fall against the ‘Greenback’.
Pound Sterling (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6811 ,
Pound Sterling,,Euro,1.2336 ,
Pound Sterling,,Australian Dollar,1.7978 ,
Pound Sterling,,New Zealand Dollar,1.9745 ,
US Dollar,,Pound Sterling,0.5949 ,
Euro,, Pound Sterling ,0.8107 ,
Australian Dollar,, Pound Sterling ,0.5559 ,
New Zealand Dollar,,Canadian Dollar,0.9274 ,
[/table]
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