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First Rate Hike in a Decade Leaves GBP Exchange Rates Tumbling

Published: 2 Nov at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Germany,

GBP Exchange Rates Topple in Response to Cautious BoE Minutes

The Pound toppled against the majors today as markets reacted to the dovish contents of the Bank of England’s (BoE) rate hike and meeting minutes.

On a 7-2 vote the Monetary Policy Committee (MPC) successfully pushed interest rates up 0.25 basis points, putting the baseline rate at 0.5% for the first time in a decade.

This move was already priced in by investors and economists, groups who were predominantly concerned with finding out what the BoE’s future outlook for economic policy might be.

Despite recognising the need for two additional rate increases to keep inflation under control, the sentiment contained within the minutes was deemed cautious, with markets particularly concerned with talk that any increases would be ‘limited and gradual’.

It was also discovered that the BoE had deleted a line from the prior statement which read that the bank intended to push for a quicker pace of rate hikes.

This news quickly weighed on the Pound, causing it to lose over 1% against all the major currencies and tumble from its recent multi-month high.

GBP EUR Exchange Rates Fall 1.7%, Eurozone Data Proves Positive

Whilst the Euro did massively capitalise on the weakened Pound today, it has otherwise remained bearish, with investors awaiting tonight’s announcement from US President Donald Trump regarding the Fed Chairman replacement before making any significant moves.

Notable data relating to the Euro today consisted of the German unemployment rate, which remained steady at the 37-year low of 3.6% and some Markit manufacturing PMIs, with the Eurozone manufacturing PMI coming in slightly below expectations at 58.5 in October.

This news did not massive affect the single currency.

GBP USD Slides 1.4%, Fed Leaves Door Open for Rate Hike

The US Dollar quickly capitalised on the BoE’s dovish rate minutes today, climbing some 1.4% against the Pound.

Against the majors, however, the US Dollar has slowly ticked down, with a delay in the release of the Republican tax bill and concerns regarding the imminent Fed Chairman announcement leaving the ‘Greenback’ limited.

Jerome Powell is now cited as the most likely candidate to be replacing Janet Yellen, and whilst he is considered to be the safest option by markets, he could still announce a deviation in policy if he wins; an eventuality that would hurt the US Dollar.

GBP CAD Tumbles Almost 2%, Oil Prices Continue to Propel ‘Loonie’

The GBP CAD exchange rate dropped almost 2% today on the back of the dovish BoE minutes as markets grew worried that today’s rate hike might simply be a one off.

The ‘Loonie’ itself has stabilised somewhat, bolstered by an ongoing surge in crude oil prices sparked by members of OPEC re-asserting their intentions to curb the global oil glut.

GBP AUD Exchange Rates Slide 1.9% Australian Trade Balance Surplus Doubles

The Australian Dollar soared today, capitalising on the weakness of the Pound and climbing on news of a giant leap in the Australian trade surplus.

Data today revealed that Australia’s trade surplus climbed to AUD 1.75bn in September, doubling from the previous period’s AUD 0.87bn and smashing the market expectation of AUD 1.2bn. This was the largest trade surplus that Australia has recorded since May, with exports jumping a whopping 3%.

The outlook for the ‘Aussie’ Dollar remains heavily tied to tonight’s announcement from US President Donald Trump regarding Janet Yellen’s replacement, however, as a rallying ‘Greenback’ could spell the end of the AUD’s climb.

GBZ NZD Tumbles 1.8%, Robust Employment Figures Keep ‘Kiwi’ Dollar Afloat

The Pound fell some 1.8% against the New Zealand Dollar today as markets responded to the dovish minutes from today’s BoE rate announcement.

The ‘Kiwi’ Dollar continues to perform at a steady pace by its own right, bolstered by Tuesday’s extremely positive employment figures (joblessness remains at its lowest level since 2008) and diminishing fears of radical policies from the new Government.

NZD traders were concerned that the policies of the new NZ leadership would promote an insular, trade averse agenda, but the only policy to thus far emerge has been a minor prohibition against foreigners buying new, New Zealand Properties. This has led many to argue that the original concern was overly pessimistic, leaving some demand for the New Zealand Dollar to return.

As of Thursday, 2nd November 2017, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1195, GBP USD exchange rate was 1.3052, GBP AUD exchange rate was 1.6922, GBP NZD exchange rate was 1.8884, and GBP CAD exchange rate was 1.6718.
Patrick James About Author: (289 Posts)Patrick completed his economics degree just as the global financial crisis struck in 2008. In the intervening years Patrick has made his mark, climbing to a prominent position within a large financial services provider. As part of his role Patrick uses his expertise to advise companies of the best ways to safeguard against currency risk.

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