The Pound Sterling to Indian Rupee (GBP/INR), Euro (GBP/EUR) and Canadian Dollar (GBP/CAD) exchange rates all experienced volatility on Tuesday as the UK published negative inflation data.
The pairings are likely to see additional movement following the release of minutes from the Bank of England’s (BoE) latest policy meeting on Wednesday.
Pound Sterling to Indian Rupee (GBP/INR) Exchange Rate Forecast: Pound sheds over 1% on UK CPI, Deflation Concerns Weigh
With little in the way of Indian data to be aware of this week, Rupee movement has been driven by Reserve Bank of India (RBI) interest rate hike speculation, commodity price movements and global economic developments.
On Tuesday it was broad-based weakness in the Pound which saw the Pound Sterling to Indian Rupee (GBP/INR) exchange rate fall by 1.30%.
The GBP/INR exchange rate hit a low of 98.4170 during the European session as the UK’s annual Consumer Price Index printed at -0.1% in April instead of holding at 0.0% as expected.
The result, while not totally surprising, does increase the odds of the Bank of England (BoE) keeping interest rates on hold until the middle of next year and immediately reduced demand for the Pound.
Tomorrow the GBP/INR pairing could experience further fluctuations as the BoE publishes the minutes from its last policy meeting.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Euro Falls as ECB Shows its Commitment to QE, ZEW Sentiment Drops
Although the Pound posted declines against almost all of its most-traded currency counterparts in response to the UK’s inflation data, the Pound Sterling to Euro (GBP/EUR) exchange rate advanced by 0.4% on the day’s opening levels.
Demand for the Euro fell after the European Central Bank (ECB) reasserted its commitment to its current easing measures and ZEW economic sentiment surveys for Germany and the Eurozone showed steep declines.
Strategist Nick Stamenkovic commented; ‘The ECB is signalling its determination to maintain the bond-purchase programme and accelerate the process before the summer, due to liquidity concerns. This is supportive for European government bonds.’
Further GBP/EUR exchange rate movement is likely to follow Wednesday’s German Producer Price data and Eurozone Construction Output numbers.
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast: ‘Loonie’ Gains before Poloz Speech
At the beginning of the week bets that the Bank of Canada (BOC) will cut interest rates in order to devalue the domestic currency put the Canadian Dollar under pressure.
However, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate registered a 0.4% decline in the wake of the UK’s inflation data.
Sterling may recoup losses later today after BOC Governor Stephen Poloz delivers a speech in Charlottetown.
If the central bank chief dismisses interest rate cut expectations the Canadian Dollar will extend gains against the Pound.
Conversely, any hints that borrowing costs will be negatively revised in the near future would weigh on the ‘Loonie’.
The Pound Sterling to Indian Rupee (GBP/INR) exchange rate was trading in the region of 98.4540, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3892 and the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trading in the region of 1.8894.
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