Posts belonging to Category Interest Rates



Pound lingering at multi-month highs as MPs back election

The pound racked up serious gains earlier in the week and has (so far) largely managed to hold on to them.

The pound racked up serious gains earlier in the week and has (so far) largely managed to hold on to them.

The GBP/EUR exchange rate remains above the €1.19 level, GBP/USD is clinging to six-month highs of $1.28 and GBP/CAD advanced from C$1.7199 to C$1.7285. However, GBP/AUD eased back from A$1.7100 to A$1.7020 while GBP/NZD slipped from NZ$1.8321 to NZ$1.8144.

Carney may address monetary policy, and if he indicates that UK interest rates aren’t likely to rise for some time to come the pound may give up some of this week’s gains.

Although the pound has come away from the week’s best levels, the currency remains close to the multi-month highs achieved on Tuesday.

On Wednesday MPs voted overwhelmingly to back the Prime Minister’s decision to hold a snap general election on June 8th.

The House of Commons voted 522 to 13 in favour of bringing the general election forward from 2020, with SNP MPs abstaining. As all the major parties had previously voiced their support for an early election, the news failed to shift the pound.

The UK is now bracing itself for the onslaught of yet more political campaigning, although the present pound support is coming from the expectation that the Conservatives will increase their majority after June’s vote.

In other news, the New Zealand dollar was boosted by a domestic report detailing a surge in inflation in the first quarter of the year. New Zealand’s CPI came in at 1.0% on a quarter-on-quarter basis and 2.2% year-on-year – this was up from a previous annual figure of 1.3%.

This morning’s German producer price index came in below forecast levels, at 0.0% on the month and 3.1% on the year vs. predictions of 0.2% and 3.2%.

Wise Money market data coming up

Barring any fresh political surprises, today’s session could be a comparatively calm one for the major currencies. That being said, there are a couple of economic releases to look out for.

The Eurozone’s construction output figures for February are unlikely to have much impact on the euro, but the region’s consumer confidence gauge may prove more influential. The measure of sentiment is believed to have improved slightly from -5 to -4.8 in April.

However, with concerns about the outcome of the upcoming French election mounting, the index may actually register a dip in confidence – and such a result could weaken the euro.

We’ve also got a speech from Bank of England (BoE) Governor Mark Carney ahead. Carney may address monetary policy, and if he indicates that UK interest rates aren’t likely to rise for some time to come the pound may give up some of this week’s gains.

As the day’s US news (initial jobless claims/continuing jobless claims figures and the nation’s leading indicators report for March) isn’t the most market-moving, the US dollar could continue reacting to geopolitical tensions.

 

 

 

Poor UK data leaves pound weaker

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17.

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17.

Less than impressive UK data left the pound weaker against the US dollar on Friday, and a general risk-off mood failed to limit Sterling’s losses against the Australian, New Zealand and Canadian dollars. The pound did hold firm against the euro however, with GBP/EUR managing to hold above the €1.1700 level.
GBP/USD dropped from $1.2473 to $1.2369 while GBP/NZD dipped from NZ$1.7908 to NZ$1.7795 and GBP/CAD slumped from C$1.6715 to C$1.6557.
GBP/AUD closed the week at AU$1.6500 but jumped by 0.5% on Monday as investors responded to the latest Australian housing data.
Accelerating consumer price pressures might force the BoE to reconsider its current wait-and-see stance on interest rates, so a stronger rate of inflation could send the pound higher.
There were a number of UK reports on the data calendar on Friday, but unfortunately for the pound none of them offered much cause for cheer.
Both industrial and manufacturing production unexpectedly declined in February (by -0.7% and -0.1% respectively) while construction output dropped -1.7% on the month and slowed to 0.5% on the year.
The UK’s trade deficit also widened and the NIESR GDP estimate for March signalled a slowing in growth in the first quarter.
Demand for the pound also eased as Bank of England (BoE) Governor Mark Carney gave no indication that UK interest rates would be increased in the near future.
Meanwhile, the US airstrike on a Syrian military base limited demand for higher-risk currencies but sent oil prices to a new one-month high (boosting the Canadian dollar in the process).

The US dollar closed out the week in a broadly stronger position as the US unemployment rate fell to its lowest level since 2007.

Wise Money markets data coming up

Today we’ve got news from the Eurozone, in the form of the Sentix investor confidence gauge, and a speech from Federal Reserve chairwoman Janet Yellen.
If the Eurozone’s confidence index shows the improvement in sentiment forecast by economists the GBP/EUR exchange rate could be pressured slightly lower.
Similarly, any hints from Yellen that the Fed could increase the number of planned interest rate hikes in 2017 would put pressure on GBP/USD.
The first bit of exciting UK news, the nation’s inflation report for March, is due out tomorrow.
At the moment the consumer price index is expected to come in at 0.3% on the month and 2.3% on the year. Accelerating consumer price pressures might force the Bank of England (BoE) to reconsider its current wait-and-see stance on interest rates, so a stronger rate of inflation could send the pound higher.

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.

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.

Article 50 activation date sends pound lower

Although the pound began the week on a bit of a high, the currency experienced a prompt reversal of fortunes as the official date for the activation of Article 50 was announced.

Although the pound began the week on a bit of a high, the currency experienced a prompt reversal of fortunes as the official date for the activation of Article 50 was announced.

The news that Article 50 would be triggered on March 29th saw the GBP/EUR exchange rate fall from a high of  ‘1.1548 to a low of  ‘1.1476. GBP/USD also lost more than 0.3% to slide to 1.2333 while both the GBP/AUD and GBP/NZD exchange rates slumped by over 0.7%.

Wise Money Markets Roundup

Prime Minister Theresa May’s plans to activate Article 50 before the end of March have been hitting headlines for quite some time. As itís been on the horizon for a while, some industry experts had predicted that the impact of the event on the pound would be minimal. While that didn’t stop Sterling falling when the date was confirmed on Monday, the currency could recover its knee-jerk losses over the rest of the week.

Economic data was in pretty short supply on Monday, with the UK Rightmove House Price index coming in at 1.3% month-on-month and 2.3% year-on-year. German producer price data fell short of forecasts, but the report had little impact on the euro as investors instead focused on the results of the latest polls for the French election. Current forecasts put the odds of right-wing candidate Marine Le Pen winning the first round of the process at 26% (neck-and-neck with closest rival Emmanuel Macron).

Currency Forecast

Although Article 50 is likely to remain in the spotlight over the week ahead, this weekís UK inflation data and retail sales figures could help the pound return to its recent highs against peers like the euro, US dollar, Australian dollar and New Zealand dollar.

If today’s inflation data confirms that the annual Consumer Price Index pushed above the Bank of Englandís (BoE) 2% target in February, it would increase the pressure on the central bank to raise interest rates – potentially boosting the pound in the process.

Similarly, this week’s domestic retail sales numbers are expected to show a rise in year-on-year consumer spending and could lend the pound further support if the estimates prove accurate.

However, if either of these reports miss the mark, we may see the poundís decline continue in the build up to March 29th.

Other economic reports to focus on today include Canadaís retail sales data and Australiaís leading index.

Pound still riding high after BoE decision

Last week’s Bank of England (BoE) interest rate decision saw the pound end the week higher against the euro and US dollar.

Last week’s Bank of England (BoE) interest rate decision saw the pound end the week higher against the euro and US dollar.

With UK inflation figures due out tomorrow, GBP could have further to climb.

As markets opened on Monday the GBP/EUR exchange rate was holding above Ä1.15 while GBP/USD stormed to high of $1.2436.

Wise Money markets Roundup

Last week was rammed with influential news, with the Dutch election, US interest rate decision and Bank of England (BoE) policy meeting all inspiring significant currency movement. While victory for Prime Minister Mark Rutte in the Netherlands lent the euro support, the US dollar weakened after a less-than-exciting policy statement from the Fed. The pound, meanwhile, was the weekís big winner thanks to an unexpected vote for an immediate rate hike in the BoE policy meeting.

Both the Australian dollar and New Zealand dollar benefited from the Fedís unchanged outlook towards future rate adjustments, but concerning growth figures from New Zealand limited NZD gains.

Currency Forecast

We could be on course for another interesting week in the currency market. Although there arenít any major news items on the calendar for today, tomorrowís UK inflation report has the potential to continue the poundís recent rally.

As some members of the BoE Monetary Policy Committee (MPC) have hinted that consumer price pressures could encourage them to vote for higher borrowing costs in the near future, another spike in inflation would be pound-supportive. Currently analysts expect a 0.5% increase in the Consumer Price Index in February, month-on-month, with an annual figure of 2.1%. This would take year-on-year inflation above the BoEís 2% target and would increase concerns that consumer spending will be restrained in the months ahead.

Pound riding high after BoE rate decision

The pound’s week of recovery continued on Thursday, with the Bank of England’s (BoE) interest rate decision giving Sterling an unexpected leg up.

The pound's week of recovery continued on Thursday, with the Bank of England's (BoE) interest rate decision giving Sterling an unexpected leg up.

What movement have we seen in the wise money markets?

In the wake of the BoE’s interest rate announcement, the pound briefly pushed above 1.15 against the euro and struck 1.23 against the US dollar (a fortnightly high).

The pound to Australian dollar exchange rate also bounced higher, climbing from 1.59 to 1.61. It was a similar story for GBP/NZD, with a rally from 1.74 to 1.77 taking the pound to its best levels in two months.

So, what happened?

BoE policymaker Kirstin Forbes was largely responsible for the pound’s surge on Thursday.

While the central bank voted to leave interest rates on hold, Forbes broke the mould and responded to the recent spike in consumer price pressures by pushing for an immediate rate increase.

Although the meeting minutes stated; ‘Attempting to offset fully the effect of weaker sterling on inflation would be achievable only at the cost of higher unemployment and, in all likelihood, even weaker income growth’, the 8-1 split was enough to boost expectations for a rate adjustment in 2017.

In other currency news, the US dollar was able to recover some of the losses sustained after the Fedís interest rate decision ñ in which borrowing costs were increased but the outlook for future hikes was left unchanged.

The euro was also strengthened by the outcome of the Dutch election and confirmation that Eurozone inflation hit a four-year high. Thursday was less positive for the Australian dollar however, with the South Pacific currency falling in reaction to less-than-impressive domestic employment numbers.

What should you be looking out for?

The poundís run of gains just might continue next week if the UK’s inflation report shows another increase in consumer price pressures.

If the annual consumer price index rises above January’s rate of 1.8% it would put more pressure on the BoE to start raising interest rates. Higher odds of borrowing costs being increased in the near future would be pound-supportive.

The UK is also set to publish retail sales figures for February, another potentially influential report. Signs that consumer spending is faltering in the face of rising prices and tepid wage growth would add to the argument in favour of a near-term rate adjustment.

Before the weekend the euro could react to the Eurozone’s latest trade balance and construction output figures. We may also see the US dollar climb this afternoon if the University of Michigan confidence index reveals an improvement in sentiment. The measure is currently forecast to rise from 96.3 to 97.

BoE rate decision ahead, could the pound gain?

The pound dropped to a new two month low against the US dollar ahead of the Federal Reserve’s interest rate decision.

The pound dropped to a new two month low against the US dollar ahead of the Federal Reserve’s interest rate decision.

 

But GBP might be safe from further losses.

What movement have we seen in the wise money markets?

It’s been a pretty hectic week for news, and yesterday we had the Fed rate decision, Dutch election and UK jobs data to contend with.

While the pound was able to hit 1.15 against the euro on Dutch election concerns, it has since fallen back to trading at 1.14.

The pound US dollar exchange rate, meanwhile, advanced to a high of 1.23 after the US interest rate decision before easing slightly to 1.22.

Sterlingís performance against the Australian dollar was a little less impressive, with the GBP/AUD exchange rate spiking to 1.61 before the Fed announcement but sliding to 1.59 in its wake. The pound remained trading in a weaker position against the Australian dollar despite Aussie jobs data falling short of the mark.

So, what happened?

The pound was able to rally yesterday as The Times published a report which detailed the need for the BoE to raise interest rates soon in order to counter the impact of rising inflation.

According to the economists referenced in the report, the BoE should increase borrowing costs by 25 basis points within the next couple of months.

The news that UK unemployment fell to its lowest levels in 41 years was also pound supportive, although disappointing wage data did limit GBP gains.

The GBP/EUR exchange rate also fell from its best levels as the far-right candidate in the Dutch election, Geert Wilders, came a distant second. As fears of rising populism have been holding the euro back in recent weeks, the news was enough to give the currency a boost.

Finally, over in the US the Federal Reserve acted as everyone expected and raised interest rates at its latest policy meeting. However, the pound actually strengthened against the US dollar on the news as the outcome had been predicted so far in advance and the Fed offered no real indication of when rates might be increased again.

What should you be looking out for?

Today’s big news is the BoE interest rate decision, due at lunchtime. The central bank isn’t likely to make any changes to policy at this point. However, if it mentions inflation and hints that borrowing costs will have to be reviewed if consumer price pressures keep growing, the pound could climb against currencies like the euro and US dollar this afternoon.

The Eurozone’s final consumer price index for February will also be of interest. If it confirms that inflation hit a four-year high, it could put pressure on the European Central Bank (ECB) to reconsider its own outlook on interest rates.

ECB Comments push GBP/EUR to 1.14

The euro broadly strengthened in the wake of the European Central Bank’s latest interest rate decision, leaving GBP/EUR to trade at new lows.

The euro broadly strengthened in the wake of the European Central Bankís latest interest rate decision, leaving GBP/EUR to trade at new lows.

 

What movement have we seen in the wise money markets?

While the pound put in another poor performance on Thursday, sliding to 1.14 against the euro and touching a low of 1.21 against the US dollar, the euro surged across the board.

EUR advanced by over 0.5% against GBP, AUD, CAD, NZD and JPY as the market responded to the European Central Bankís latest interest rate decision.

Euro gains against the US dollar were less substantial in light of the high likelihood of a Federal Reserve interest rate hike taking place next week, but EUR/USD did briefly breach 1.06.

So, what happened?

Initially the reaction to the ECB’s interest rate decision was pretty minimal as the central bank left everything unchanged.

However, Super Mario (the affectionately nicknamed ECB President) gave the euro a big kick higher as he announced positive revisions to Eurozone growth forecasts.

The future path of ECB policy is still pretty unclear, but Draghi stated; ‘We haven’t seen yet any significant development on the wages front, and that is the key point. We are more optimistic about the growth forecast, we have to see how these improved prospects, as far as growth is concerned, translate into higher headline inflation.’

With little news to lend the pound support, the slightly more optimistic outlook put forward by the ECB was enough to drive the GBP/EUR exchange rate to its worst levels of the week so far.

What should you be looking out for

Next week is set to be a volatile one for the currency market. For one thing, weíve got the hotly-anticipated Federal Reserve interest rate decision.

If the Fed hikes interest rates, and the odds of that happening are currently sitting at over 80%, the US dollar is likely to surge – potentially causing GBP/USD to drop to its lowest levels since 2016.

But UK news is also likely to trigger GBP volatility next week. Of the data set for release Wednesday’s employment numbers and Thursday’s Bank of England (BoE) interest rate decision carry the most weight.

With the job stats, a dip in average earnings or a disappointing employment change number would inspire pound losses, but the BoE decision could have the power to reverse any previous pound movement.

As the recent UK PMIs hinted at a slowdown in domestic growth in the first quarter the BoE may opt to err on the side of caution and reiterate that interest rates are as likely to be cut as raised. However, pound volatility is likely to follow any indications that the central bank is leaning more one than another.

Busy week ahead for the US

Last week, we saw a fairly subdued market with a lack of important data as most releases of note were focussed on the commodity currency countries such as Canada and New Zealand.

 Last week, we saw a fairly subdued market with a lack of important data as most releases of note were focussed on the commodity currency countries such as Canada and New Zealand.

There were also no major developments regarding Brexit and political uncertainty within the US and Europe.

The week ahead is looking a lot busier, macro-schedule wise. Fed Chair Janet Yellen’s semi-annual testimony to Congress (Tuesday & Wednesday) will call for close attention, as sheís likely to be asked about any possible implications for the monetary policy of Trump’s fiscal stimulus. Furthermore, any hints that the Federal Reserve may have to revise its interest rate projections higher could provide a spot of strength/support to the dollar.

Looking back at the macroeconomics this week, a busy schedule for the US includes features January’s retail sales, industrial output and CPI figures. On the other hand, with all eyes on Trump and the Fed, the dollar reaction to the data may be limited.

A potential week of struggle for the euro

There’s also a fairly light Eurozone schedule regarding market data, with the January ECB ‘account’ as the main highlight. Therefore, the euro could struggle this week and the GBPEUR pairing would potentially move upwards, should the expected results follow through. We may also see a dip in confidence as the UK could lose its position as a ‘gateway to Europe’ for the worldís financial services industry, according to last weekís speech by Dr Andreas Dombret, an executive board member at the Bundesbank. However, weíre likely to see these comments dismissed should this week follow suit, as mentioned.

Expected increase in UK retail sales

Lastly, here in the UK, retail sales are expected to record a solid increase for January, while a further mark-up on inflation is also predicted. Overall, the UK’s macro schedule looks like it could be beneficial for the strength of Sterling across the next few days with CPI figures, average earnings index and claimant count change.

Looking at today’s calendar, this morning we will receive Europe December industrial production reports for France, Italy and the UK. As we look at the US this afternoon import price index reading for January is the main piece of data together with the flash University of Michigan consumer sentiment reading for this month. As mentioned earlier, the main event to keep an eye on is the meeting between President Trump and Japan PM Abe.