Posts belonging to Category Inflation



Euro loses election gains, pound hits 6 month high vs. US dollar

The pound managed to strike new multi-month highs against the US, Australian, New Zealand and Canadian dollars yesterday without the backing of any positive UK developments.

The pound managed to strike new multi-month highs against the US, Australian, New Zealand and Canadian dollars yesterday without the backing of any positive UK developments.

The ECB rate decision helped GBP/EUR achieve highs of €1.1885, dissatisfaction with Trump pushed GBP/USD all the way to $1.2914, and further Canadian dollar losses meant GBP/CAD was able to surge to a new best level of C$1.7633. Meanwhile, GBP/AUD climbed another cent to AU$1.7326 as GBP/NZD achieved NZ$1.8815 – its strongest rate since July last year.

A seriously worse-than-expected US durable goods orders report didn’t help the situation and GBP/USD skipped merrily to a six-month high.

Yesterday’s European Central Bank (ECB) meeting left the euro struggling, with President Mario Draghi seeming keen to quash speculation that there are any plans to adjust monetary policy at this juncture.

Although he acknowledged that the Eurozone’s economic outlook is a little brighter, he also asserted that ‘a very substantial degree of monetary accommodation’ is still necessary in order to give inflation a leg up.

With the euro falling in the wake of Draghi’s comments, the pound was able to creep its way up to its best levels since the results of the first round of the French general election were announced.

While Draghi was responsible for the euro’s losses, it was President Trump causing reduced demand for the US dollar. Concerns that his hotly-anticipated tax plan was actually a bit of a flop saw USD exchange rates slide. A seriously worse-than-expected US durable goods orders report didn’t help the situation and GBP/USD skipped merrily to a six-month high.

Persistent weakness in the commodity currencies also worked in the pound’s favour, allowing the British currency to advance to some of its best levels since the EU referendum.

News that the GfK survey of consumer confidence softened from -6 to -7 in April failed to take the wind out of the pound’s sales on Friday.

Wise Money market data coming up

The UK and US GDP reports are some of the key highlights on the economic calendar today. If US growth slows to the extent forecast in the first quarter (from 2.1% to 1.0%) GBP/USD could be headed for even dizzier heights.

The Eurozone is also set to publish inflation figures for April. In light of Draghi’s comments yesterday, slowing inflation is liable to send the euro lower. Conversely, if non-core inflation increases to 1.8% from 1.5% as anticipated the euro could bounce back before the weekend.

Looking ahead to next week and the biggest economic movers of GBP exchange rates will be the UK’s services, construction and manufacturing PMIs for April. Indications that economic output is slowing would put the pound under pressure as campaigning for the UK snap election intensifies.

 

Pound returns to multi month highs before growth data

UK news might have been lacking yesterday but that didn’t stop the pound striking new multi-month highs against the Canadian, Australian and New Zealand dollars.

UK news might have been lacking yesterday but that didn’t stop the pound striking new multi-month highs against the Canadian, Australian and New Zealand dollars.

Sterling was also able to claw back some of this week’s losses against the euro and edge higher against the US dollar.

GBP/EUR advanced from €1.1731 to €1.1817, GBP/USD jumped from $1.2807 to brush $1.2900, GBP/AUD hit AU$1.7233 (its best level since September 2016), GBP/NZD gained two cents to achieve NZ$1.8676 (its strongest rate since last July) while GBP/CAD remained close to seven-month highs at C$1.7475.

Signs that the post-Brexit economic slowdown predicted before the EU referendum is becoming reality would be pound-negative and may leave GBP exchange rates softer before the weekend.

A blank economic calendar for the UK left the pound to be moved by external developments yesterday, and a combination of profit-taking, US news and trade concerns ensured the British currency came out on top against most of its rivals.

While the euro edged away from its recent highs ahead of the European Central Bank’s (ECB) interest rate decision, demand for the US dollar eased as President Donald Trump unveiled disappointing tax plans.

The main development was the decision to slash US corporation tax from 35% to 15%, but fears that this move could result in a ballooning US budget deficit left the US dollar struggling.

Meanwhile, a tweet from Trump condemning Canada’s perceived injustices against US dairy farmers inspired concerns that New Zealand (the world’s largest exporter of dairy products) could come under fire next, resulting in significant New Zealand dollar losses.

Demand for the Australian dollar also remained tepid after domestic inflation data fell short, reducing the odds of the Reserve Bank of Australia (RBA) increasing interest rates.

 

Wise Money market data coming up

Today’s big news item is the European Central Bank’s (ECB) interest rate decision. No changes to monetary policy are expected, but the tone and content of President Mario Draghi’s accompanying statement could inspire euro movement.

Any hints that the central bank is preparing to taper its quantitative easing programme would give the euro a boost and could drive GBP/EUR back to this week’s lowest levels.

Other news includes US trade balance, wholesale inventories and durable goods orders data. A trio of positive results would support US interest rate hike expectations and could give the US dollar a bit of a lift.

We’ll finally see some UK data on Friday, in the form of the GfK consumer confidence index and the nation’s first quarter growth data.

Signs that the post-Brexit economic slowdown predicted before the EU referendum is becoming reality would be pound-negative and may leave GBP exchange rates softer before the weekend.

Seven month highs for GBP on UK election news

We thought this week would be a fairly quiet one in the world of currency… how wrong we were.

We thought this week would be a fairly quiet one in the world of currency… how wrong we were.

UK Prime Minister Theresa May delivered a major bombshell on Tuesday morning when she announced the intention to hold a snap election on June 8th. The news sent shockwaves through the currency market and sent the pound to a succession of multi-week and multi-month highs.

The GBP/EUR exchange rate jumped from €1.1754 to €1.1962, GBP/USD surged from $1.2525 to $1.2856 (a six-month high), and both GBP/CAD and GBP/NZD achieved seven-month highs (of C$1.7234 and NZ$1.8287 respectively).

UK election news is likely to continue dominating headlines, and dictating pound movement, as the week progresses.

UK data releases are in pretty short supply this week, so we returned from the Easter break assuming that pound movement would be fairly minimal.

As it happened, PM Theresa May unexpectedly put a cat among the pigeons and inspired some of the pound’s best gains since the EU referendum last year.

May had previously asserted that there would be no election before 2020 so her sudden turnaround was surprising to say the least.

May stated; ‘Division in Westminster will risk our ability to make a success of Brexit and it will cause damaging uncertainty and instability to the country. So we need a general election and we need one now, because we have at this moment a one-off chance to get this done while the European Union agrees its negotiating position and before the detailed talks begin.’

At the moment it is expected that the election will see PM May gain a larger majority in parliament, an outcome which would improve the government’s ability to follow through with the aims of its Brexit negotiations.

Wise Money market data coming up

 

UK election news is likely to continue dominating headlines, and dictating pound movement, as the week progresses.

This morning’s Eurozone inflation data is unlikely to have much of an impact on the euro, given that it is forecast to confirm that the region’s CPI printed at 1.5% on the year and 0.8% on the month in March.

While the Fed’s Beige Book could inspire some GBP/USD fluctuations later in the day it would need to contain some seriously sensational information to counter the impact of this week’s UK election shocker.

We are likely to see volatility in the GBP/NZD pairing however after New Zealand publishes its inflation report for the first quarter.

Economists have forecast that inflation surged from 0.4% to 0.8% quarter-on-quarter and from 1.3% to 2.0% year-on-year.

 

GBP/EUR hits highest levels since February

With demand for higher-risk currencies dropping in reaction to growing geopolitical tensions, the pound was able to hit new highs against currencies like the euro and US dollar.

With demand for higher-risk currencies dropping in reaction to growing geopolitical tensions, the pound was able to hit new highs against currencies like the euro and US dollar.

The GBP/EUR exchange rate advanced to €1.1821 – it’s highest levels since February – while GBP/USD approached $1.26.

GBP/AUD stormed 0.7% higher as soon as markets opened on Monday to strike AU$1.6674 while GBP/NZD rallied to NZ$1.7962.

The week’s main causes of pound movement are likely to be a speech from Bank of England (BoE) Governor Mark Carney on Thursday and the UK’s latest retail sales numbers on Friday.

Last week President Donald Trump sent the US dollar tumbling when he asserted that the currency is currently overvalued, and GBP/USD has managed to hold above the $1.25 level ever since.

The pound’s strength against the other majors is partially due to concerns surrounding the increasingly tempestuous relationship between the US and North Korea.

With North Korea attempting to demonstrate its strength over the weekend with a military parade featuring a number of long-distance missiles, currencies like the Australian and New Zealand dollars slumped.

The US dollar also slid as a result of the North Korean news on the belief that geopolitical uncertainty could prevent the Federal Reserve from increasing interest rates as rapidly as previously hoped.

Meanwhile, speculation that the outcome of the French Presidential election could be too close to call helped the pound rack up gains against the euro.

Wise Money market data coming up

There’s no UK news scheduled for release today, so pound movement could be limited.

Some GBP/USD fluctuations may be inspired by the US building permits, housing starts and manufacturing/industrial production reports.

If the data impresses, the pound may give up some of its recent gains in hopes that domestic strength will be enough to push the Fed into continuing its rate-hiking policy.

GBP/CAD could also experience movement following the release of Canada’s existing home sales report given current concerns about Canada’s housing market.

The week’s main causes of pound movement are likely to be a speech from Bank of England (BoE) Governor Mark Carney on Thursday and the UK’s latest retail sales numbers on Friday.

Consumer spending is believed to have fallen by -0.5% on the month, taking the annual figure from 4.1% to 3.8%.

If retail sales are shown to have dropped in March the pound could slide at the end of the week.

 

Can the pound hold gains heading into the Easter weekend?

Wednesday’s UK wage data turned out to be slightly better than forecast, so the pound enjoyed a fairly strong day of trading.

Wednesday’s UK wage data turned out to be slightly better than forecast, so the pound enjoyed a fairly strong day of trading.

 

The GBP/USD exchange rate finally pushed above the key $1.25 level (hitting a high of $1.2575). Meanwhile, GBP/EUR held €1.1750 and GBP/AUD struck a new two-month high of AU$1.6710.
GBP/NZD climbed a cent over the course of trading, pushing all the way to a seven-month best of NZ$1.8070.
The pound wasn’t able to come out on top against the Canadian dollar however, with the BoC interest rate decision leaving GBP/CAD trading in the region of C$1.6613.
The main UK causes of pound movement next week are likely to be the Rightmove House Price report and retail sales numbers for March.
Yesterday’s pound gains were largely the result of the UK’s latest jobs data showing a slightly stronger-than-forecast increase in average earnings. Average earnings including bonuses increased by 2.3% rather than the 2.2% expected. Wages excluding bonuses were up 2.2% rather than 2.1%.
However, the pound’s advances were a little timid in light of the fact that the UK added fewer positions than expected in the three months through February. The employment change of 39k was almost half the 70k job increase anticipated.
Later in the day the GBP/USD exchange rate was able to push higher as US President Donald Trump sent the US dollar reeling.
Trump asserted; ‘I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting – that will hurt ultimately […] It’s very, very had to compete when you have a strong dollar and other countries are devaluing their currency.’
Hints that the US should maintain a policy of low interest rates contributed to the evaporation of demand for the US dollar and allowed higher-risk currencies (like the Australian and New Zealand dollars) to climb.

Wise Money markets data coming up

There isn’t much on the data calendar with the potential to inspire significant currency movement today, so the pound may be able to close out trading ahead of the four-day weekend in a stronger position against many of its currency rivals.
If German inflation is confirmed at 0.2% on the month and 1.5% on the year in March, GBP/EUR could firm slightly amid bets that the European Central Bank (ECB) will refrain from making any changes to monetary policy for the foreseeable future.
Similarly, GBP/USD may consolidate its position above $1.25 if the University of Michigan Confidence index dips from 96.9 to 96.6.
The main UK causes of pound movement next week are likely to be the Rightmove House Price report and retail sales numbers for March. A drop in consumer spending would be pound-negative.
Although the Eurozone is set to publish final inflation figures, consumer confidence data and preliminary services, manufacturing and composite PMIs, the euro may prove more reactive to the latest developments in the French Presidential election.
In terms of US news, the nation’s housing and industrial/manufacturing stats could be the main market-movers. Reports which support the case in favour of a June rate hike from the Fed would be US dollar supportive.

GBP/EUR nears €1.18 before wage data

Although the pound didn’t have much of an initial reaction to the UK’s latest inflation data, GBP later surged against is rivals as geopolitical developments left investors wary of higher-risk currencies.

Although the pound didn’t have much of an initial reaction to the UK’s latest inflation data, GBP later surged against is rivals as geopolitical developments left investors wary of higher-risk currencies.

The pound was able to approach the €1.18 level against the euro, hitting a high of €1.1780, while GBP/USD advanced by over half a cent to strike $1.2494.
Sterling’s performance against the Australian and New Zealand dollars was even more impressive, with GBP/AUD jumping to a two-month high of AU$1.6682 and GBP/NZD climbing to its best levels since December 2016 (NZ$1.8008)
If average earnings increase Sterling could extend yesterday’s gains and potentially hit new multi-week and multi-month highs.
The UK’s inflation data (billed to be yesterday’s big news item) turned out to be a bit of a non-event in terms of inspiring pound movement.
Inflation was shown to have remained at a three-year high of 2.3% in March thanks to rising tobacco, food, alcohol, and clothing prices.
However, as the result wasn’t viewed as having much influence on Bank of England (BoE) interest rate hike expectations (it would take a substantial uptick in consumer price pressures to push the central bank into adjusting policy) its impact on the pound was minimal.

But later in the day the pound came into its own amid reports that American officials had made public warnings to Russia, China and North Korea. With North Korea insinuating that it has nuclear weapons aimed at US army bases, fears that geopolitical tensions could rapidly escalate saw higher-risk currencies drop and the pound climb.

 

Wise Money markets data coming up

Today the UK is set to publish its latest batch of employment figures. The unemployment rate is expected to remain at 4.7%, with the UK having added 68k positions.
While the pound could enjoy a little boost if it turns out that the UK added more jobs than expected, the wage numbers are likely to have more influence on how GBP performs today.
If average earnings increase (despite being forecast to remain unchanged at 2.2%) Sterling could extend yesterday’s gains and potentially hit new multi-week and multi-month highs.
However, any slowing in average earnings would relieve the pressure on the BoE to make adjustments to interest rates and could send the pound tumbling in the hours ahead.
Other news to watch out for today includes a speech from BoE Governor Mark Carney and the Bank of Canada (BoC) interest rate decision.
The BoC isn’t expected to make any adjustments to monetary policy but if it issues cautious commentary about the risks facing the domestic economy, the GBP/CAD exchange rate could climb.

Services PMI, Trump and French elections in focus, will GBP keep sliding?

The pound held losses against the euro and US dollar on Tuesday, with GBP/EUR fluctuating between €1.1700 and €1.1643 and GBP/USD ending the day at $1.2425.

The pound held losses against the euro and US dollar on Tuesday, with GBP/EUR fluctuating between €1.1700 and €1.1643 and GBP/USD ending the day at $1.2425.

Although demand for higher-risk currencies faltered, the pound also dipped to a low of AU$1.6402 against the Australian dollar. Sterling did manage to hold its own against the New Zealand dollar however (despite an increase in dairy prices) with GBP/NZD reaching a high of NZ$1.7862.
The UK’s services PMI is likely to be the main cause of pound movement, with a positive result having the potential to send Sterling back to its weekly highs.
Although yesterday’s UK construction PMI showed an unexpected dip in output in March, the report had little real impact on the pound.
As Monday’s manufacturing measure also fell short, the release increased concerns that today’s much more influential services PMI will complete a hat trick of less-than-impressive stats and indicate that the UK economy faltered at the end of the first quarter. However, general anxieties about the global economic outlook were the main cause of weakness in GBP exchange rates.
There are a number of factors reducing risk appetite at the moment, including the French election, the suspected terrorist attack in St Petersburg and concerns about the direction this week’s meeting between US President Donald Trump and Chinese President Xi Jinping could take. These anxieties served to boost the safe-haven US dollar but limit demand for the pound.

GBP/EUR losses were also the result of the Eurozone publishing more upbeat data, with the region’s latest retail sales report showing a stronger-than-expected increase in consumer spending.

Wise Money market data coming up

The UK’s services PMI is likely to be the main cause of pound movement in the hours ahead, with a positive result having the potential to send Sterling back to its weekly highs.
As it stands, economists have forecast a modest acceleration in growth from 53.3 to 53.5.
However, if the services measure falls (like its manufacturing and construction equivalents) the pound could keep sliding.
US data may also inspire GBP/USD movement today, with the nation set to publish the ADP employment change number and services PMI.
The labour data is forecast to show a deceleration in the number of positions added in March. As any softening in employment is likely to prevent the Federal Reserve from revising its current plans to increase interest rates just twice more in 2017, the US dollar could fall if the report meets expectations.

Pound dips on UK manufacturing slump

After starting the week strongly, the pound spent Monday sliding against currencies like the US dollar and euro.

After starting the week strongly, the pound spent Monday sliding against currencies like the US dollar and euro.

The GBP/EUR currency pair fell from a high of €1.1741 to a low of €1.1636, while GBP/USD snuck back below the key $1.25 level to trade in the region of $1.2442.

The pound’s losses against the commodity currencies were less significant, with GBP/AUD managing to return to trading at AU$1.6438 following the Reserve Bank of Australia’s (RBA) interest rate decision. GBP/CAD also held pretty steady as the resumption of oil production in Libya saw the price of Canada’s core commodity dip.

A construction PMI reading of less than 52.5 could see the pound extend its recent losses against the euro and US dollar.

The main cause of the pound’s Monday downtrend was the UK manufacturing PMI from Markit.
The gauge had been forecast to come in at 55, but it actually fell to 54.2 in March. February’s figure was also negatively revised to 54.5.
Although the report contained a fair few positives, it also indicated that growth in the sector is expected to keep easing.
Markit Senior Economist Rob Dobson noted; ‘With growth losing further momentum in March, that weaker trend is likely to continue into the second quarter. The latest survey also clearly shows that high costs and weak wage growth are sapping the strength of consumers, with rates of expansion in output and new orders for these products slowing further.’
Meanwhile, the euro was supported by a decline in the Eurozone’s unemployment rate from 9.6% to 9.5%. The currency bloc’s manufacturing PMI also came in at its best level in six years.

Over in Australia, a disappointing Australian retail sales report was swiftly followed by the Reserve Bank of Australia’s (RBA) latest interest rate decision. While the central bank left interest rates on hold, the concerns it expressed about Australia’s housing market kept the ‘Aussie’ under pressure.

Wise Money market data coming up

Today’s main UK news is the nation’s construction PMI for March. The index is expected to come in at 52.5, unchanged from February.
While the UK construction sector only accounts for around 6% of total economic growth, a below-forecast reading would increase concerns that tomorrow’s much more influential services PMI will also show a slide in output.
Subsequently, a reading of less than 52.5 could see the pound extend its recent losses against the euro and US dollar.
However, the GBP/EUR pairing could fight back in the afternoon if the Eurozone’s retail sales stats disappoint or if European Central Bank (ECB) President Mario Draghi indicates that monetary policy is unlikely to be adjusted for the foreseeable future.
The GBP/USD exchange rate could also experience further movement before the end of the day as the US publishes its factory orders and durable goods orders numbers for February.

Is the pound headed for new highs this week?

A Sterling surge before the weekend helped the pound close out the week in a stronger position against the euro and recover earlier losses against both the US and Australian dollars.

A Sterling surge before the weekend helped the pound close out the week in a stronger position against the euro and recover earlier losses against both the US and Australian dollars.
Over the last seven days GBP/EUR has recovered from €1.1451 to hit highs of €1.1741 while GBP/USD returned to trading in the region of $1.2526 after dropping to lows of $1.2385. GBP/AUD also bounced back from its worst levels of AU$1.6185 to trend in the region of AU$1.6470.

But can the pound’s run of gains continue? If these reports show that the UK economy closed out the first quarter of 2017 in a strong position, the pound’s recent run of gains could continue.

The pound ended the week on a high thanks to the UK’s latest current account report. One of economists’ big concerns about the post-referendum period was that the current account deficit could spiral, so the news that the shortfall actually shrank from -£25.7 billion in Q3 to -£12.1 billion in Q4 gave Sterling a significant boost.

The UK’s Q4 growth data was more mixed, with the rate of quarter-on-quarter expansion coming in at 0.7% (as forecast) but annual growth being revised down to 1.9%.
The pound’s gains against the euro were also the result of the Eurozone’s inflation stats showing a sharper-than-anticipated slowing in consumer price pressures. The CPI dropped from 2.0% to 1.5% in March.

Wise Money market data

There are quite a few influential data releases to focus on today, including the UK’s manufacturing PMI and the Eurozone’s unemployment figures.
Over in the US we also have the Markit manufacturing and composite PMIs, the ISM manufacturing PMI and the ISM employment report.
The UK’s manufacturing PMI will be followed by its construction and services equivalents later in the week. If these reports show that the UK economy closed out the first quarter of 2017 in a strong position, the pound’s recent run of gains could continue.
As the UK’s services sector accounts for over 70% of GDP, a strong showing from this measure could push GBP exchange rates to new highs.
However, economists have forecast that today’s Eurozone unemployment data will show a decline in joblessness from 9.6% to 9.5%. If that proves to be the case it could undermine some of the recent strength in the GBP/EUR exchange rate. Similarly, upbeat manufacturing data from the US would be US dollar supportive, potentially pushing GBP/USD back below $1.25.

Pound recovering losses before Article 50 activation

Although the pound dipped from its highs before the weekend, Sterling still ended Friday up on the week’s opening levels against most of its currency counterparts.

Although the pound dipped from its highs before the weekend, Sterling still ended Friday up on the weekís opening levels against most of its currency counterparts.

GBP/EUR fell from its best rate of ‘1.1615 to trade at ‘1.1569, GBP/USD closed the week at $1.2471 (up from lows of $1.2344) and GBP/AUD managed to hold AU$1.6358 after starting Monday at AU$1.5966.

What’s been happening?

Hints from the Bank of England (BoE) that rising inflation may not prompt higher interest rates were the main cause of the poundís losses on Friday.

Central bank official Gertjan Vlieghe left GBP exchange rates weaker when he commented that the recent spike in domestic consumer price pressures may not have an impact on monetary policy.

He stated; ‘It is not at all obvious what the impact for monetary policy would be and it might not have one. If [the pound’s post-referendum decline] is the reason why inflation is higher than expected, it does not necessarily have an impact unless it also feeds into inflation expectations.’

Over in the Eurozone, the euro was bolstered by an impressive composite PMI print. The six-year high in private sector growth contributed to the GBP/EUR slide before the weekend.

However, the GBP/USD exchange rate was able to recover Friday’s losses as President Donald Trump’s ability to implement planned tax reforms and stimulus measures was called into question.

What’s coming up?

Although there isn’t any UK data on the calendar to look out for today, the pound has so far managed to start the week quite strongly. GBP/EUR has returned to trading above ‘1.1550 while the GBP/USD and GBP/AUD exchange rates have both advanced by over 0.7%. GBP/NZD is up 0.5%.

The first UK reports arenít due out until Wednesday, but with the activation of Article 50 also taking place that day the consumer credit and mortgage approvals numbers might not have much impact.

Of the week’s domestic releases, the most influential are likely to be Thursday’s GfK Consumer Confidence Survey and Fridayís final 4Q GDP figure. An improvement in sentiment would be pound supportive, as would confirmation that the UK economy expanded by 0.7% in the final quarter of 2016 (as previously forecast).