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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 hits monthly high of €1.19

Gradual pound gains seem to be the theme of the week, with Sterling spending Tuesday sneaking its way higher against the majors.

Gradual pound gains seem to be the theme of the week, with Sterling spending Tuesday sneaking its way higher against the majors.

GBP/EUR advanced to a May high of €1.1921, GBP/USD tiptoed to an eight-month high of $1.2981, GBP/AUD surged from AU$1.7557 to AU$1.7649, GBP/NZD closed the day above NZ$1.8800 and GBP/CAD recovered from C$1.7673 to C$1.7816.

With ‘Super Thursday’ looming, what can we expect from the pound?

If the Monetary Policy Committee (MPC) is still split on whether interest rates should rise, the pound may hit new multi-month highs against the majors.

 

Wise Money market roundup

It’s been a pretty good week for the pound so far, with the currency quickly shaking off a slightly sluggish start and managing to achieve its best levels for months against several of its rivals.

Positive UK news came in the form of an impressive like-for-like sales report from the British Retail Consortium (BRC). Like-for-like sales had only been expected to increase 0.5% so the actual result of 5.6% was well received.

Meanwhile, the euro’s post-election rally stalled, the Australian dollar was weakened by a concerning slump in domestic retail sales, the Canadian dollar was pressured lower by sliding crude oil prices and the New Zealand dollar softened ahead of the Reserve Bank of New Zealand (RBNZ) interest rate decision.

What’s coming up money wise?

With another quiet day for UK data ahead, the pound may be on pause ahead of tomorrow’s ‘Super Thursday’ of Bank of England (BoE) announcements.

Given that the UK general election is just weeks away, the BoE is highly unlikely to make any changes to monetary policy, but the attitude of policymakers towards future adjustments will be key to how the pound ends the week.

If the Monetary Policy Committee (MPC) is still split on whether interest rates should rise, the pound may hit new multi-month highs against the majors.

However, if the MPC is united in its belief that policy should remain accommodative despite spiking inflation we could see Sterling give up this week’s gains.

The BoE will also be publishing its inflation report. Upwardly revised inflation forecasts could boost the odds of the central bank increasing interest rates in the near future and would therefore be pound-supportive.

The Reserve Bank of New Zealand (RBNZ) will be delivering its latest interest rate decision later today. If the RBNZ takes a cautious stance, GBP/NZD could be driven to new post-Brexit highs.

 

 

 

 

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.

 

 

Two US rate hikes still expected for 2017

Signs that the UK’s Brexit negotiations are going to be a bit more tempestuous than hoped have left the pound a bit despondent this week, with the currency failing to see much benefit from positive domestic data.

Signs that the UK’s Brexit negotiations are going to be a bit more tempestuous than hoped have left the pound a bit despondent this week, with the currency failing to see much benefit from positive domestic data.

In the past 24 hours the GBP/EUR exchange rate has fallen from €1.1846 to lows of €1.1799 while GBP/USD has slumped from $1.2935 to $1.2842. However, GBP/AUD has risen from AU$1.7246 to AU$1.7393 and GBP/NZD has advanced from NZ$1.8623 to NZ$1.8751.

 

Wise Money roundup

Yesterday’s UK construction PMI continued the week’s theme of better-than-forecast UK data by coming in at 53.1 in April, up from 52.2 in March. This followed hot on the heels of Tuesday’s unexpectedly strong manufacturing report.

As the construction sector contributes so little to total economic output, the result was a pleasant surprise but had little positive impact on Sterling.

In fact GBP exchange rates actually weakened on Wednesday thanks to concerns that the UK’s Brexit negotiations were already getting off to a bad start.

Accusations from Prime Minister Theresa May that Brussels was interfering in the UK election and threats of a whopping €100 billion exit bill saw the pound drift lower against the euro.

GBP/USD also fell in the wake of the Federal Reserve’s interest rate decision. While the central bank took no action at this juncture, it left the door wide open to two further rate increases over the rest of 2017.

The Fed’s statement asserted that it ‘views the slowing in growth during the first quarter as likely to be transitory.

While expectations of a June adjustment supported the US dollar, a softening in higher-risk currencies helped the pound stand firm against the Australian and New Zealand dollars.

What’s coming up?

Rumours that the Queen has called a meeting of ‘all staff’ at Buckingham Palace have been dominating headlines today, but as long as the subject of the meeting doesn’t have an economic focus the UK’s services PMI is still likely to be the main cause of pound movement today.

A hat-trick of positive results would give the pound a boost, but if the all-important services sector is shown to be struggling the pound could extend recent losses.

Eurozone retail sales data is also likely to impact the GBP/EUR pairing. As it stands, sales are believed to have stagnated on the month but risen from 1.8% to 2.1% on the year.

While better-than-expected figures could send the euro higher, gains may be limited ahead of the second round of the French election – due to take place on Sunday. Over in the US we’ve got trade balance, initial jobless claims and durable goods orders data to focus on.

 

 

 

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.

Pound hits March high vs. euro

The beginning of Brexit didn’t faze the pound yesterday, with the currency racking up gains all over the place.

The beginning of Brexit didn't faze the pound yesterday, with the currency racking up gains all over the place.

GBP/EUR achieved its best levels of March, surging from a low of $1.1550 to hit $1.1700. While the pound wasn’t able to return to trading above $1.2500 against the US dollar it did gain half a cent despite a sturdy US growth figure.

Sterling stormed higher against the New Zealand dollar, rallying almost 2 cents to achieve a best rate of NZ $1.7890. GBP/AUD gains were slightly less impressive, with the pound failing to hold a high of A$1.6352 and closing the day at AU $1.6267.

What’s been happening?

Although the UK is now facing two years of potentially arduous Brexit negotiations, the pound is currently benefiting from the pretty friendly tone of initial communications between Britain and the EU.

Lloyd’s of London did announce that it would be relocating jobs to Brussels, but markets were cheered by the governmentís plan to implement the ‘Great Repeal Bill’ in May – a move which will turn an epic list of EU laws into British ones.

The pound was also able to advance on the euro due to a disappointing set of inflation figures for Germany. With the nation’s consumer price index decelerating by significantly more than expected, hopes that the European Central Bank (ECB) will tighten stimulus in the near future dimmed, and the euro softened accordingly.

In terms of UK data, the GfK consumer confidence index held at -6 in March rather than sliding to -7 as forecast. The Lloyds business barometer was less reassuring however, dropping from 40 to 35.

What’s coming up?

Already today Nationwide house price figures have fallen short of the mark, with property prices sliding -0.3% on the month (instead of climbing 0.3%) and rising 3.5% on the year (down from price growth of 4.5% in February).

Currency volatility could be on the horizon next week thanks to a number of high-profile data releases. For the UK we’ve got manufacturing, construction and services PMIs, manufacturing/construction output numbers and trade balance figures. If the UK’s PMIs show that growth in the nation’s three key sectors remained robust in March, it would up the odds of more Bank of England (BoE) policymakers voting for higher borrowing costs and give the pound a boost.

The Eurozone will be offering up unemployment and retail sales numbers, along with German factory orders and construction stats. Meanwhile, US dollar fluctuations are most likely to occur in response to the US non-farm payrolls data. Sturdy employment figures would support Fed rate hike expectations (and the US dollar) while any sign of weakness in the labour market could put the plan for two further rate hikes in jeopardy and leave USD exchange rates weaker.

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.

Spring budget could trigger pound shifts today

The pound dropped to new multi week lows ahead of the spring budget and could extend those losses today if tax hikes and spending cuts are revealed.

The pound dropped to new multi week lows ahead of the spring budget and could extend those losses today if tax hikes and spending cuts are revealed.

What movement have we seen in the currency market?

While the Australian dollar gained on a cautiously optimistic interest rate announcement from the Reserve Bank of Australia (RBA) and the US dollar remained supported by Fed rate hike expectations, the poor pound experienced another day of declines.

Sterling slid by -0.3% to hit seven-week lows against the euro and US dollar on Tuesday – with GBP/USD falling below 1.22.

What happened?

Well, for starters the UK published another batch of disappointing economic data.

Concerns that rising inflation and stagnant wage growth are hampering consumer spending were compounded as the British Retail Consortiumís (BRC) annual like-for-like sales figure for February came in at -0.4%, revealing a sharper drop than forecast.

Economist Samuel Tombs said of the result; ‘The BRC’s survey provides more evidence that the surge in retail sales in the second half of last year reflected consumers bringing forward purchases from 2017, because they anticipated price rises. The weakness was concentrated again in non-food sales, which fell by 0.2% on a total basis in the three months to February, the lowest growth since November 2011.’

Halifax housing data also showed that house price growth slowed to a three-year low.

Adding to the pound’s woes was speculation surrounding today’s UK spring budget.

What should you be looking out for?

Chancellor of the Exchequer Phillip Hammond is expected to discuss grammar school funding, social care, youth employment, fuel prices, stamp duty and pensions.

If the markets don’t like what Hammond has to say, the pound’s bad week could get even worse. However, if the Chancellor outlines some spending increases sterling may be able to pull itself away from this weekís lows.

Beyond the budget, the next UK news to focus on is the house price balance number from RICS. As it stands, a decline from 25% to 23% is anticipated.

Markets focus on a possible rate hike

The US Dollar is slightly weaker on the pound as the markets have reacted to Donald Trump’s congress speech.

The US Dollar is slightly weaker on the pound as the markets have reacted to Donald Trump's congress speech.

This reaction was fairly limited and markets are instead focusing on significantly higher risks of a rate rise by the Fed at the 14-15 March meeting, especially after the comments from New York Fed President, Dudley, that the case for tightening ìhas become a lot more compellingî. As a result, there could be some market volatility on the dollar in the coming weeks, while investors look to take their positions.

Anti-climax of Trump’s speech

US President eagerly awaited speech was a slight anti-climax as he offered an uncharacteristic upbeat theme that sought to calm his opponents. Despite delivering an address which had a familiar ‘America First’ theme throughout, similar to that of his inaugural speech, there was more of a presidential tone which could be a sign that he is trying to be more diplomatic in his firm approaches. Furthermore, Mr Trump reconfirmed that he intends to repeal and replace Obamacare, increase defence spending, enforce immigration laws and also overhaul tax including cuts for the middle class.

Today’s data

Most of the day will be spent deciphering Mr Trump’s speech with some potential volatility later in the day. Data wise, we’ll have the German provisional CPI (exp 0.6%mm, 2.1%yy) and Unemployment (exp -10K, 5.9%) for January and the US Personal Consumption/Expenditure figures. The Construction Spending and Total Vehicle Sales are also due, as well as Fed speeches from Kaplan and Brainard, late in the day.