Posts belonging to Category Interest Rates



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.

 

 

 

GBP set for volatility with inflation, wage data and election manifestos ahead

The pound flopped towards the end of last week as the Bank of England (BoE) soundly squashed hopes of a near term interest rate increase.

The pound flopped towards the end of last week as the Bank of England (BoE) soundly squashed hopes of a near term interest rate increase.

GBP/EUR fell from a high of €1.1923 to a low of €1.1781 last week, GBP/USD eased from $1.2983 to $1.2848, GBP/AUD dipped from AU$1.7643 to AU$1.7362, GBP/NZD fluctuated between NZ$1.8614 and NZ$1.8949 and GBP/CAD slid from C$1.7805 to C$1.7606.

Pound volatility can be expected if the manifestos have any impact on which party dominates in the latest polls.

 

 

Wise Money market roundup

Comparatively sturdy UK growth and climbing inflation had supported the hope that the BoE might be contemplating raising borrowing costs sooner than previously expected. However, Thursday’s BoE interest rate decision soundly kicked such projections into touch.

While the central bank was relatively optimistic about the UK’s outlook, the odds of any changes being made to interest rates before 2019 appears slim. Demand for the pound fell as only one member of the Monetary Policy Committee (MPC) voted to increase interest rates and Sterling failed to recover before the weekend.

The euro, meanwhile, received a shot in the arm from Germany’s Q1 growth data. GDP in the Eurozone’s largest economy came in at 0.6% in the first three months of 2017 – making it the best performing G7 economy.

It wasn’t such good news from the US however, with disappointing retail sales figures limiting Sterling’s losses against the US dollar.

What’s coming up money wise?

Whether or not the pound is able to recoup last week’s losses largely depends on how some of this week’s high-ticket items on the UK’s economic calendar turn out.

With inflation, employment, wage growth and retail sales stats all due for release over the next few days, GBP exchange rates could be in for a rocky ride.

The pound may fall if the reports show spiking consumer price pressures and stagnant wage growth as such a scenario is likely to inhibit spending and weigh on the UK’s all-important services sector in the months ahead.

However, economic news will be vying for attention with political developments this week as party manifestos are published ahead of the 8th June general election.

Labour’s manifesto was leaked last week and the Conservatives’ own plans are likely to come under equal scrutiny. Pound volatility can be expected if the manifestos have any impact on which party dominates in the latest polls. GBP exchange rates could fall if Conservative support falters as the prospect of a Labour or coalition victory would increase the uncertainty surrounding the UK’s Brexit negotiations.

 

 

Pound tumbles as BoE hints that interest rates won’t climb until 2019

Yesterday wasn’t too super for the pound, with GBP exchange rates broadly declining in the wake of the BoE’s latest interest rate decision.

Yesterday wasn’t too super for the pound, with GBP exchange rates broadly declining in the wake of the BoE’s latest interest rate decision.

GBP/EUR dropped to a low of €1.1838, GBP/USD fell from $1.2944 to $1.2853, GBP/AUD edged from AU$1.7570 to AU$1.7439, GBP/NZD closed the day at NZ$1.8839 (up from a low of NZ$1.8774) and GBP/CAD dropped from C$1.7754 to C$1.7620.

Rising inflation could pressure the BoE into reconsidering its current stance on interest rates, so a stronger-than-anticipated result may boost GBP.

 

Wise Money Market roundup

Given that there wasn’t much going on for most of the week, the spotlight was really on Thursday’s trio of Bank of England (BoE) announcements.

Although ‘Super Thursday’ is the name applied when the BoE makes its interest rate decision, releases meeting minutes and publishes its inflation report, there wasn’t much super about yesterday.

Hopes that the central bank might vote for an increase in borrowing costs in the near future were quashed when only one member of the Monetary Policy Committee (MPC) voted for an immediate adjustment.

BoE Governor Mark Carney added to the pound’s woes. When asked if the current level of stimulus being employed by the central bank is excessive, he replied; ‘The stimulus isn’t excessive, it’s appropriate, first point, and that’s the judgement of the committee.’

Bets that borrowing costs won’t change until 2019 saw the pound fall away from its recent multi-month highs against the US, Australian, New Zealand and Canadian dollars.

The day’s other UK news wasn’t so hot either, with industrial output slowing in March and the nation’s trade deficit widening.

What’s coming up money wise?

With no UK news on the calendar for today, the pound may struggle to recover yesterday’s losses before the weekend.

Today’s Eurozone news (German growth and inflation numbers) came in largely as expected, although non-seasonally adjusted Q1 year-on-year growth beat forecasts and rose to 2.9%.

The GBP/USD exchange rate could slide further this afternoon if the US inflation report shows that consumer price pressures remained above target in April.

Looking ahead to next week and the main UK news to focus on includes the nation’s inflation, employment and retail sales data.

Rising inflation could pressure the BoE into reconsidering its current stance on interest rates, so a stronger-than-anticipated result may boost GBP.

A decent uptick in average earnings would also bolster the pound, as would signs that consumer spending remained strong in April.

 

 

 

GBP/EUR back to €1.18 despite Macron’s triumph in French election

A trio of unexpectedly upbeat UK economic reports for the services, manufacturing and construction sectors left the pound pretty upbeat as markets closed for the weekend and Sterling remains close to multi-month highs.

A trio of unexpectedly upbeat UK economic reports for the services, manufacturing and construction sectors left the pound pretty upbeat as markets closed for the weekend and Sterling remains close to multi-month highs.

The GBP/EUR exchange rate begins this week at €1.1827 (up from this morning’s low of €1.1786), GBP/USD remains above $1.2950, GBP/AUD is trading at AU$1.7534 (up 5 cents from last week’s opening levels of AU$1.7070), GBP/NZD is holding NZ$1.8700 and GBP/CAD’s current rate of C$1.7735 is one of its highest since the UK voted to Brexit last year.

What impact did the French election have on GBP/EUR?

The new French President has intimated he will be taking a tough stance on Brexit, and any further hints that he plans to make the UK’s exit from the EU difficult could send the pound lower.

 

Wise Money Market Roundup

The new French President has intimated he will be taking a tough stance on Brexit, and any further hints that he plans to make the UK’s exit from the EU difficult could send the pound lower.

Although the reports aren’t expected to alter the Bank of England’s (BoE) current attitude on interest rates, they are at least an encouraging sign of how the UK economy is performing.

The data was enough to give the pound a leg up against its peers and help it shake off concerns surrounding the fraught relationship between Prime Minister Theresa May and EU officials.

Meanwhile, over in France, Centrist Emmanuel Macron managed to crush far-right Marine Le Pen in the second round of the French election, taking 65% of the vote.

While this outcome has helped dispel Frexit fears, it was so long expected that its impact on the euro was pretty minimal. EUR exchange rates did enjoy a small rally immediately after the results were announced, but quickly fell back to previous levels.

The Australian dollar came under pressure this morning as domestic building approvals plummeted (exacerbating worries about the Australian housing bubble) and China’s trade data revealed a sharp slump in imports.

 

What’s coming up money wise?

Today’s economic calendar isn’t exactly bursting with exciting releases, but there are a couple of reports to look out for.

The Eurozone’s Sentix Investor Confidence index for May is expected to climb from 23.9 to 25.2 – a potentially euro-positive result.

Canada is also set to release housing starts data, while the US rounds off the day with its measure of labour market conditions.

Macron’s victory may also be responsible for further movement in the currency market in the days and weeks ahead. The new French President has intimated he will be taking a tough stance on Brexit, and any further hints that he plans to make the UK’s exit from the EU difficult could send the pound lower.

 

 

 

 

Pound boosted by unexpected UK economic strength

While the pound might have failed to get the upper hand against the euro, upbeat UK data helped Sterling strengthen against the US, Australian, New Zealand and Canadian dollars.

While the pound might have failed to get the upper hand against the euro, upbeat UK data helped Sterling strengthen against the US, Australian, New Zealand and Canadian dollars.

The GBP/EUR exchange rate dropped from €1.1812 to €1.1753 but GBP/USD advanced from $1.2844 to $1.2941, GBP/AUD hit an eight-month high of AU$1.7530 and GBP/NZD fluctuated between NZ$1.8701 and NZ$1.8869.

 

Wise Money Market Roundup

What’s been happening?

A better-than-forecast UK services PMI gave the pound a bit of a boost on Thursday and helped the currency recover its previous Brexit-related losses.

The services report came in at 55.8 (beating predictions of 54.5) and rounding off a trio of unexpectedly perky releases.

Markit economist Chris Williamson said of the report; ‘The upturn in the services PMI rounds off a hat trick of good news after upside surprises to both the manufacturing and construction PMIs. The three surveys collectively point to GDP growing at a rate of 0.6% at the start of the second quarter.

While we expect consumer spending to slacken in coming months, with the April survey highlighting continued weakness in sectors such as hotels, restaurants and other household-facing businesses, there’s good reason to believe that at least 0.4% GDP growth can be achieved in the second quarter as a whole.’

The news that Prince Philip will be retiring from public life later this year didn’t impact the pound, but it did dominate headlines for much of the day.

Meanwhile, the belief that Centrist Emmanuel Macron won the final televised debate of the French Presidential election bolstered support for the euro ahead of Sunday’s vote, weakening GBP/EUR in the process.

What’s coming up?

The pound could extend gains against the US dollar before the weekend if the US non-farm payrolls report disappoints. Any weakness in the labour market could make the Federal Reserve think twice about raising interest rates in June.

Sunday’s French election will be the catalyst for GBP/EUR movement at the beginning of next week. The euro could rally if Macron does take the Presidency, despite his victory being so long expected.

However, if 2017 turns out to be as politically shocking as 2016 and far-right Marine Le Pen emerges triumphant, EUR exchange rates are likely to record dramatic losses.

Next week the most high-profile events on the UK’s economic calendar are the publication of UK trade data and the Bank of England’s interest rate decision/inflation report.

The BoE is highly unlikely to take any action at this juncture, and the minutes from its report may err on the side of caution in light of the upcoming UK general election.