Posts belonging to Category Interest Rates



Pound stabilises above post-election lows, political uncertainty reigns supreme

After falling in reaction to the outcome of Thursday’s general election, the pound is beginning the week in a more stable position.

After falling in reaction to the outcome of Thursday’s general election, the pound is beginning the week in a more stable position.

The GBP/USD exchange rate is also likely to stumble on Wednesday, with the Federal Reserve expected to increase interest rates at its latest policy gathering.

When PM Theresa May called for a snap election back in April her campaign hinged on the promise of maintaining strength and stability during the UK’s Brexit negotiations.

However, it’s fairly safe to say that her ability to deliver on that promise is now in question, with Thursday’s vote leaving the nation more mired in uncertainty than ever.

The Conservatives succeeded in losing their majority, a result which is unlikely to strengthen Theresa May’s hand in exit talks.

May has so far resisted calls for her resignation but the prospect of a minority government backed by the DUP is currently failing to excite much confidence in the government’s ability to secure a good deal for Britain.

While the pound has now stabilised following Friday’s sell off, it remains at multi-week and multi-month lows against the major currencies.

Wise Money markets ahead

With no potentially exciting economic reports on the calendar for today, the fallout from last week’s vote will remain the main driver of GBP exchange rate movement.

If the outcome of the election leads to the pursuit of a ‘soft Brexit’ (where the UK retains access to the single market) the pound could ultimately benefit.

However, if it appears that those members of the Conservative party pushing for a complete severing of the UK’s relationship with the EU are more likely to get their way now that May has lost her majority, the pound could be headed for new lows over the next few weeks.

In light of everything that has happened/is happening, tomorrow’s UK inflation stats may prove less influential than usual.

That being said, the pound could come under further pressure if the rate of inflation eases.

Although the odds of the Bank of England (BoE) reconsidering its current stance on interest rates are minimal (especially in the face of such political uncertainty) easing consumer price pressures would certainly add to the argument in favour of keeping borrowing costs lower for longer.

The GBP/USD exchange rate is also likely to stumble on Wednesday, with the Federal Reserve expected to increase interest rates at its latest policy gathering.

 

 

 

Pound reels as UK left with hung parliament

Is there further for the pound to fall?

Is there further for the pound to fall?

The UK took to the polls yesterday in GE2017 and it is fairly safe to say that Prime Minister Theresa May didn’t get the result she was hoping for.

The pound was left reeling as the votes were calculated and the Conservatives fell short of the 326 seats required for a majority.

The fallout from the election will be the driving force behind GBP exchange rate movement over the rest of the day.

The pound surged back in April when PM Theresa May called the snap election on the widely held belief that the Conservatives would storm their way to an increased majority.

Bets that a landslide victory would strengthen Theresa May’s hand in Brexit negotiations initially kept the pound elevated, but the currency started losing ground as a rocky campaign left her victory in doubt.

GBP exchange rates dropped 2% as last night’s exit polls pointed to a hung parliament, and this time the polls proved accurate.

While these movements are hardly as dramatic as seen following the EU referendum last year, there could be further shifts on the horizon.

With the Conservatives failing to secure the required majority, the UK’s political landscape looks murkier than ever.

If Theresa May listens to calls for her resignation the situation will be even more tenuous with only days left until Brexit negotiations are due to commence.

Wise Money markets ahead

The fallout from the election will be the driving force behind GBP exchange rate movement over the rest of the day, with any shocking announcements (like Theresa May’s resignation) having the potential to extend the pound’s losses.

However, a rapid turnaround in coalition talks and the quick establishment of a working government could help the pound recover.

Although the UK is set to publish industrial/manufacturing production, construction output, trade and growth figures, the data is unlikely to have an impact with eyes so firmly focused on the outcome of yesterday’s historic vote.

 

 

 

Little on European markets but potential big day for the GBPUSD pair

The key event of yesterday the June ECB meeting had little effect on wise money markets.

The key event of yesterday the June ECB meeting had little effect on wise money markets.

Mario Draghi continued to put emphasis on the ECB standing ready to input more Quantitative easing, if deemed necessary.

Markets had little reaction as this is considered old news at this stage and as a result, there was no major direct influence on the Euro. Most of yesterday was generally fairly quiet in terms of other Euro data, or rather lack of.

Looking at the main Euro pairs over the last 24 hours, they’ve been trading in tight ranges and only differ slightly from yesterday’s open.

This is relatively calming following the yoyo-like movements we’ve previously been seeing due to Brexit uncertainty and the changing sentiment polls.

It looks like EURUSD is on its way back down from its early May rally and most of the majors are looking a little worse off than a couple of weeks ago.

 

Wise Money awaiting US Non-Farm Payroll figures

 

Looking ahead at the dollar, today we have the US Non-Farm Payroll figures for May due for release at 13:30.

Following the Fed’s preconditions of a rate hike being dependent on a continuing improvement in the labour market, these figures are likely to be watched very closely.

If today’s figure is close to the forecast (164,000), it should strengthen expectation for a Fed rate hike through the coming summer months.

This could provide us with some upwards movement as we move into this weekend.

 

 

 

 

 

Pound rattled on new referendum poll

The pound dived sharply yesterday on the release of a new poll that showed a surprise lead for the leave camp.

 

The pound dived sharply yesterday on the release of a new poll that showed a surprise lead for the leave camp.

Over the last two weeks we have seen good momentum for the pound off the back of polls, suggesting the remain camp was pulling ahead.

However, it was almost inevitable that we would see a conflicting poll suggesting the opposite, and yesterday two Guardian/ICM polls showed a split of 52%-48% in favour of a Brexit.

The pound fell sharply against the USD and the euro on this news, and is continuing to struggle this morning. In the run up to polling day we are likely to see the pound pulled around significantly as conflicting polls and news drive price action.

Wise money news to come

Today the focus will continue to be on the Brexit momentum as we start the month of June.

In addition we have ISM manufacturing data from the US later today and sentiment is split on the momentum for manufacturing, and a weak number cannot be ruled out.
Elsewhere, we have substantial amounts of PMI data from the Euro area, France and Germany. The initial Euro area number came in slightly weaker, however Germany and France both showed good uplift.

The interest today will be in the periphery and the potential for the numbers here to be soft.

 

Multi week lows for GBP on prospect of hung parliament

Sterling spiralled to multi-week lows against all the major currencies at the close of last week as unexpectedly tight election polls left the outcome of June’s vote in doubt.

Sterling spiralled to multi-week lows against all the major currencies at the close of last week as unexpectedly tight election polls left the outcome of June’s vote in doubt.

GBP/EUR dropped to a two-month low of €1.1432, GBP/USD slumped to one-month low of $1.2783, GBP/AUD brushed a worst rate of AU$1.7173, GBP/NZD tumbled to a six-week low of NZ$1.8115 and GBP/CAD was left trading in the region of C$1.7201.

Political developments will continue dominating headlines (and dictating pound movement) for much of this week with the election now just over a week away.

 

Wise Money market roundup

The pound (like the rest of us) was left really feeling the need for the Bank Holiday weekend, having experienced a bit of a dismal end to the week.

The resumption of political campaigning and the publication of the latest election polls conspired to send Sterling lower across the board.

The polls showed that Conservative’s lead against Labour had plummeted from 20 to 5 in just a matter of weeks.

Concerns that the election could result in a hung parliament left the pound at multi-week lows against the euro, US dollar and Canadian dollar.

The slide in GBP/USD was also the result of positively revised US growth data as the report boosted hopes that the Federal Reserve will increase interest rates in June.

Sterling was able to recoup some losses against the euro however amid concerns that the Greek bailout negotiations could come to a grinding halt. Greek Finance Minister Euclid Tsakalotos issued a warning to the nation’s creditors – Greece would not move on to the next stage of bailout discussions without the IMF and EU agreeing to debt relief.

What’s coming up money wise?

Political developments will continue dominating headlines (and dictating pound movement) for much of this week with the election now just over a week away.

There are no UK reports set for release today, but GBP/EUR fluctuations could follow the publication of the Eurozone’s economic/industrial/services and consumer confidence figures and German inflation stats for May.

Upbeat releases could see the pound return to its weakest levels against the euro.

Meanwhile, the US will be publishing personal consumption and consumer confidence numbers.

As long as the data supports the case in favour of the Federal Reserve increasing interest rates next month, the GBP/USD exchange rate is likely to remain trading in the region of a one-month low.

 

 

 

 

Weaker UK growth, slashed Tory lead leaves pound struggling

The pound fell to new lows at the close of the week following the release of worse-than-expected UK growth data and the latest election poll results.

The pound fell to new lows at the close of the week following the release of worse-than-expected UK growth data and the latest election poll results.

GBP/EUR plummeted to €1.1465 from €1.1534, GBP/USD dropped below $1.2900 to trade in the region of $1.2859, GBP/AUD struggled to hold AU$1.7300, GBP/NZD lost 0.7% to hit a low of NZ$1.8264 and GBP/CAD shed 0.6% to trade in the region of C$1.7333.

What impact has the latest election news had on the pound? GBP exchange rates could keep falling if the gap between Labour and the Conservatives narrows further.

 

 

Wise Money market roundup

All in all, it’s fairly safe to say that it hasn’t exactly been the best week for pound exchange rates.

After stagnating for the first half of the week, Sterling tumbled on Thursday on the news that the UK economy juddered almost to a standstill in the first quarter of 2017. An initial estimate of 0.3% growth quarter-on-quarter was negatively revised to 0.2%.

A 1.4% drop in net exports was of particular concern as the post-EU referendum slide in Sterling was expected to support the sector.

The pound-negative news continued on Friday as election campaigning resumed following Monday’s tragic terror attack in Manchester.

The latest election poll published by YouGov/Times revealed that the Conservative’s lead against Labour now sits at just 5 points, down from a lead of 20 points only a couple of weeks ago.

The Conservatives are now commanding 43%, with Labour at 38%.

Given the prevailing belief that a stronger majority for the Conservatives would improve the government’s hand during Brexit negotiations, this latest twist left the pound reeling.

What’s coming up money wise?

The GBP/USD exchange rate could experience further volatility before markets close for the weekend as the US publishes its own growth data for the first quarter.

The Federal Reserve recently indicated that it would need to see signs that the US economy is bouncing back after its earlier slowdown before it would progress much further down its rate hiking path.

Consequently, if the data reveals a slowing in output the pound could recoup some of its recent losses. However, GDP is believed to have come in at 0.9% (up from a previous figure of 0.7%) so GBP/USD could instead approach the Bank Holiday trading at new lows.

Looking ahead to next week and the biggest UK reports to look out for include the nation’s GfK consumer confidence index and Markit’s manufacturing/construction PMIs.

However, with the election within touching distance, political motivations are likely to be the main cause of pound movement. GBP exchange rates could keep falling if the gap between Labour and the Conservatives narrows further.

 

 

 

GBP recovers despite threat of hard Brexit

After a more than sluggish start to the week, the pound finally managed to recoup some losses on Tuesday.

After a more than sluggish start to the week, the pound finally managed to recoup some losses on Tuesday.

GBP/EUR advanced from €1.1529 to €1.1614, GBP/USD peaked at $1.3021 (up from lows of $1.2956), GBP/AUD marched from AU$1.7265 to AU$1.7431 and GBP/NZD improved from NZ$1.8418 to NZ$1.8563.

If Draghi holds with the view that the current level of stimulus is appropriate the euro could slide.

 

Wise Money market roundup

The pound’s Tuesday gains came in spite of fairly damning comments from German Finance Minister Wolfgang Schaeuble.

The German official warned that Britain ‘will learn Brexit was a mistake’ – indicating that the Eurozone’s largest economy has no intention of making the negotiations easy for the UK.

Other UK news was also less-than-inspiring, with data from the Office for National Statistics (ONS) showing that the UK borrowed significantly more than anticipated in April.

Elsewhere, the euro was supported by upbeat data for the Eurozone, including an impressive manufacturing report for the currency bloc.

The US dollar, meanwhile, fluctuated as the US services index impressed but the nation’s manufacturing equivalent fell short.

What’s coming up money wise?

The pound crept higher on Wednesday, recording modest gains against most the main currencies.

There’s nothing notable on the calendar in terms of UK data today, so any further pound movement is likely to be the result of either political developments or influence from elsewhere.

This morning’s German GfK consumer confidence result beat forecasts, edging up from 10.2 to 10.4, but its impact on the euro was minimal.

However, GBP/EUR volatility may follow today’s speech from European Central Bank (ECB) President Mario Draghi. Earlier in the week German Chancellor Angela Merkel blamed the ECB’s quantitative easing scheme for the relative weakness of the euro.

Any response Draghi makes to those remarks will be closely attended to. If Draghi holds with the view that the current level of stimulus is appropriate the euro could slide.

We also have the Bank of Canada (BOC) interest rate decision, with a cautious tone from the central bank liable to boost the GBP/CAD exchange rate.

Of course we may also see GBP/USD movement following the publication of the minutes from the Federal Reserve’s last policy meeting. Support for a rate increase in June would benefit the US dollar.

 

 

Pound exchange rates dip as Conservative lead narrows

With the Conservative’s lead over labour falling in the latest polls, the pound edged lower as a new week of trading began.

With the Conservative’s lead over labour falling in the latest polls, the pound edged lower as a new week of trading began.

GBP/EUR hit a low of €1.1587 (down from opening levels of €1.1611), GBP/USD eased from a high of $1.3010 to $1.2973, GBP/AUD lost 0.3% to trade in the region of AU$1.7412 and GBP/NZD plummeted over 0.7% to hit a low of NZ$1.8667.

How did the latest election news weaken the pound? Additional pound losses are likely if the Conservative lead narrows further over the next couple of weeks.

Wise Money market roundup

Monday’s pound losses were largely due to the news that the latest polls relating to the fast-approaching UK general election revealed a decline in the Conservative lead following the publication of the party manifestos.

According to Reuters; ‘May had been on course for a landslide with a majority of up to 150 seats, opinion polls had indicated in the early stages of campaigning ahead of the June 8 national vote.

Four polls on Saturday however showed the Conservatives with an expected vote share of between 44 and 46 percent, still easily ahead of the Labour Party on 33 to 35 percent, but pointing to a smaller projected majority of about 40 seats.’

As a greater Conservative majority is expected to improve the UK’s hand in Brexit negotiations, the news that the outcome might be tighter than previously projected left Sterling struggling.

The pound recorded losses against all the majors and fell back below $1.30 against the US dollar after previously benefiting from dovish interest rate related comments from a Federal Reserve official.

GBP/EUR was also floundering thanks to the news that Greek MPs had supported the introduction of more austerity in order to receive the nation’s next batch of financial aid.

Additional pound losses are likely if the Conservative lead narrows further over the next couple of weeks.

What’s coming up money wise?

There isn’t much on the calendar today with the potential to inspire currency movement.

However, tomorrow is looking more interesting in terms of influential releases.

GBP/EUR could experience volatility in response to Germany’s final Q1 GDP data and the publication of manufacturing, services and composite PMIs for the Eurozone and its largest economies.

If the PMI releases point to slowing output it would reduce the likelihood of the European Central Bank (ECB) changing its current stance on monetary policy, potentially weakening the euro.

The UK, meanwhile, will be publishing its public finance figures while the US has Markit manufacturing, services and composite PMIs scheduled for release.

 

 

 

 

 

 

Pound gives up retail sales gains on flash crash

An upbeat UK retail sales report gave the pound a boost on Thursday, but a surprising ‘flash crash’ in the evening saw GBP give up its gains.

An upbeat UK retail sales report gave the pound a boost on Thursday, but a surprising ‘flash crash’ in the evening saw GBP give up its gains.

GBP/EUR fell from €1.1727 to €1.1627, GBP/USD dropped from $1.3041 to $1.2923, GBP/AUD tumbled from AU$1.7569 to AU$1.7380 and GBP/NZD fluctuated between NZ$1.8691 and NZ$1.8841.

Of course, with the UK general election fast approaching, political developments could take centre stage in the weeks ahead.

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Wise Money market roundup
After struggling for most of the week the pound staged an impressive rebound on Thursday thanks to a better-than-forecast set of retail sales figures for the UK.

Despite stagnant wage growth and soaring inflation, British consumers shopped until they dropped in April. Retail sales surged by 2.0% on the month and 4.5% on the year – smashing forecasts of 1.0% and 2.6%.

Although economists expect consumer spending to fall in the months ahead, the unexpected resilience in retail sales shown last month was enough to help the pound recover much of this week’s losses.

GBP/USD was also supported by the ongoing Trump scandal, with impeachment murmurs keeping the US dollar under pressure.

However, in the evening the pound experienced an unexplained reversal. The sudden GBP losses were attributed to a ‘flash crash’ and the currency remained at its lower levels on Friday.

What’s coming up money wise?

Of the economic reports due for release today, the ones most likely to inspire currency fluctuations include the Eurozone’s current account and consumer confidence figures (with positive results having the potential to boost the euro) the UK’s CBI trends total orders/trends selling prices stats and Canada’s retail sales and inflation numbers.

Next week is pretty light in terms of influential UK data, with only public borrowing and first quarter GDP stats due to have much of an impact on the pound.

A slower rate of growth in the first three months of 2017 could leave Sterling struggling.

Of course, with the UK general election fast approaching, political developments could take centre stage in the weeks ahead. The pound may be bolstered if polls show that support for the Conservatives remains strong as the general consensus appears to be that a win for Theresa May could strengthen Britain’s hand during Brexit negotiations.

 

 

 

Pound drops to 5 week low on UK inflation concerns

Accelerating UK inflation left the pound fluctuating on Tuesday, with the currency first climbing and then falling against most of its rivals.

Accelerating UK inflation left the pound fluctuating on Tuesday, with the currency first climbing and then falling against most of its rivals.

GBP/EUR dropped from €1.1732 to a five-week low of €1.1620, GBP/USD eased from $1.2943 to $1.2874, GBP/AUD fluctuated between AU$1.7343 and AU$1.7446 and GBP/NZD slid from NZ$1.8805 to NZ$1.8667. GBP/CAD closed the day little changed at C$1.7586.

Can UK wage data help the pound recover? If wage growth beats expectations the report could give Sterling the burst of momentum it needs to recover lost ground.

 

Wise Money market roundup

Yesterday’s UK inflation report showed that consumer price pressures accelerated to a new three-and-a-half year high of 2.7% in April – beating forecasts for a reading of 2.6%.

As the Bank of England (BoE) made it clear last week that it’s willing to look through higher inflation for the time being, the result did nothing to boost rate hike expectations.

Concerns that higher inflation (in conjunction with sluggish wage growth) will restrain consumer spending and weigh on UK economic output left the pound weaker on Tuesday.

GBP/EUR slumped to its worst level in five weeks after losing almost a cent.

The pound was able to largely recoup losses against the US dollar however as a new scandal involving President Donald Trump and Russia left people wary of USD.

While the UK’s inflation data was the main cause of pound movement on Tuesday, GBP/NZD also fluctuated in response to the latest GlobalDairyTrade auction, where the price of New Zealand’s key commodity increased 3.2%.

 

What’s coming up money wise?

In light of yesterday’s inflation report and the Bank of England’s (BoE) recent commentary about wage growth, today’s UK average earnings figures will be of particular importance.

Average weekly earnings including bonuses are believed to be up 2.4% on the year in March, an improvement on February’s figure of 2.3% but still considerably lower than the current rate of inflation.

Growth in earnings excluding bonuses is believed to have eased from 2.2% to 2.1% during the same period.

If the results meet or come in below forecast, the pound could extend Tuesday’s losses on fears that a drop off in consumer spending will damage the UK’s growth outlook. However, if wage growth beats expectations the report could give Sterling the burst of momentum it needs to recover lost ground. The UK’s unemployment rate is forecast to hold at 4.7%, with the nation adding 21k jobs.

Final Eurozone inflation data may also inspire GBP/EUR movement. As easing price pressures in the currency bloc would reduce the odds of the European Central Bank (ECB) adjusting interest rates anytime soon, a slower rate of inflation would be euro-negative.