In the latest surprising twist in the ongoing global economic saga, the Federal Open Market Committee decided to act against expectations for a ‘Sep-taper’ and continue with the current bond-purchase level of 85 billion Dollars.
This unforeseen development sent shock waves reverberating through the currency market, as investors abandoned safe-haven assets in favour of their higher-yielding peers.
The Pound Sterling to Euro Exchange Rate was in the region of 1.1846 as of 10:40 GMT.
In the immediate aftermath of the announcement Sterling posted its most significant advance against the US Dollar for three years and hit an eight-month high.
As senior currency strategist Greg Gibbs highlights; ‘The general consensus is that clearly this is a more dovish Fed than they thought and clearly it throws some doubt around the timing of the removal of the QE policies. The Bank of England had a more hawkish bent in its minutes yesterday so we’ve seen significant improvement in the Pound. It probably will continue to strengthen modestly in the short term.’
However, as the European session opened the Pound was slightly softer against the Euro, and after UK retail sales figures were published the British currency’s decline continued.
Sterling weakened by 0.8 per cent against the Euro as retail sales declined by 1.0 per cent in August, month-on-month, rather than stagnating as expected.
Year-on-year retail sales advanced 2.3 per cent last month, significantly less than the 3.2 per cent forecast.
The lacklustre result was largely due to a plunge in food sales.
The MoM sales decline was the worst recorded for ten months.
1 Euro is currently worth 0.8440 pence
Economist David Tinsley said this of the report; ‘While the data is disappointing on the month, the trend in sales continues to look solid. The release today is probably a useful reminder that the economy’s progress is not going to be a one-way progression to soar-away data.’
After the data was released the Pound shed 0.5 per cent against the US Dollar.
In response to Sterling’s reversal, one industry expert observed; ‘Retail sales has proved a bit of a reality check for Sterling. There had been a decent run of better than expected data in the UK which had been pushing the Pound higher and the Fed just gave it the last push above 1.60 Dollars. It had the wind taken out of its sales a bit.’
However, if today’s US initial jobless claims data hint at further weakness in the US employment sector the GBP/USD pairing could recover losses as the trade progresses.
Current Pound Sterling (GBP) Exchange Rates:
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The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.6068 <
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1846 <
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.6909 <
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.9186 <
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6225 >
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8440 >
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5906 >
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5214 >
(As of 10:40 GMT)
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