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Daily Currency News: Pound Sterling Rises after US Dollar Drops on Inflation Upset

Published: 13 Sep at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada,

Pound Sterling (GBP)

Pound Sterling has traded in a narrow range against the Euro and risen against the US Dollar today, following an uneventful Bank of England (BoE) meeting.

BoE policymakers left interest rates at 0.75% and are not expected to raise them until 2019; the Pound has risen because a weak US Dollar has driven up Sterling demand.

The Pound could rise further on Friday if Bank of England (BoE) Governor Mark Carney gives an optimistic economic outlook on Friday, although there is no guarantee of any mention of monetary policy when Mr Carney makes his remarks.

Euro (EUR)

This afternoon’s European Central Bank (ECB) meeting has raised Euro trader optimism and boosted demand for the single currency, which has brought gains against the US Dollar and tight trading against the Pound.

ECB officials left interest rates at 0%, but the central bank’s forecasts revealed that inflation was expected to remain close to the target range of 2% over 2019 and 2020.

This raised hopes for a 2019 interest rate hike, something that is currently pencilled in by a number of Eurozone economists.

The week may end with Euro losses – Friday morning’s Eurozone trade balance reading is tipped to show a shrinking surplus during July.

US Dollar (USD)

The US Dollar has been one of today’s weaker-performing currencies, having fallen by -0.4% against the Euro and the Pound (among other peers).

This deterioration in value follows the news that US inflation has printed lower than expected during August, which has rattled USD traders.

Although the year-on-year slowdown from 2.9% to 2.7% has still left price growth above the Federal Reserve’s target of 2%, some USD traders are worried that this will reduce the chances of a future Fed interest rate hike.

Friday afternoon will bring a pair of high-impact US data releases – retail sales and consumer confidence readings for August and September respectively.

Retail sales growth is predicted to slow and higher consumer confidence levels are forecast, so the US Dollar could turn volatile against its peers on such news.

Australian Dollar (AUD)

Thanks to the US Dollar’s decline today, the Australian Dollar has conversely risen in value, appreciating against the Pound, Euro and US Dollar.

As well as the weak USD boosting Australian Dollar demand, the Australian currency has also been supported by better-than-expected employment figures.

These showed an above-forecast increase in the number of employed persons during August, by 44k instead of the expected 15k.

The next Australian data isn’t due out until next Tuesday, when Reserve Bank of Australia (RBA) minutes will be released.

For Australian Dollar traders, it would be best if the minutes point towards a potential interest rate hike in 2019 as this could boost the Australian currency’s value.

New Zealand Dollar (NZD)

The New Zealand Dollar has fallen against the Pound and Euro today, but has elsewhere made a minor rise against the weaker US Dollar.

This overall poor performance comes after an Ipsos survey revealed that 50% of respondents are worried about the national housing market and a Fonterra profits report showed an unprecedented NZ$-196m loss.

The latter news is particularly concerning as Fonterra is New Zealand’s largest dairy exporter and the country has a significant dependence on stability in the dairy farming sector.

The New Zealand Dollar’s losses could be extended by this evening’s Business NZ PMI for August, if it reveals a forecast-matching decline in activity levels during the month.

Canadian Dollar (CAD)

Like the US Dollar, the Canadian Dollar has been in low demand today and losses have been seen against the Pound, Euro and US Dollar.

This all-around decline in value has been caused by continued uncertainty about future Canadian trading relationships – there are still no clear signs that a revised North American Free Trade Agreement (NAFTA) will include Canada.

The data calendar is relatively quiet for Canadian Dollar traders going ahead – the next high-impact news will be 21th September’s inflation rate readings.

Slower inflation is predicted on the month and the year in August – the Canadian Dollar could decline on such news.
As of Thursday, 13th September 2018, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1214, GBP USD exchange rate was 1.3113, GBP AUD exchange rate was 1.8223, GBP NZD exchange rate was 1.9923, and GBP CAD exchange rate was 1.7046.
Dominic Lee About Author: (474 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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