UK Consumer Price Index Results in Bullish Pound, Euro Wavering as Greek Repayment Deadline Nears

Published: 18 Aug at 11 AM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, China, Greece,

Pound Sterling
Some good news for the Pound came this morning as the UK Consumer Price Index surpassed expectations, rising to 0.1% instead of remaining at 0%. Demonstrating that inflation is now on the rise this data has prompted further speculation for a near-future interest rate hike from the Bank of England (BoE), with Sterling making bullish gains across the board. Nevertheless, it still seems likely that a rate rise will come in the first quarter of next year rather than before and Thursday’s Retail Sales data could well bring about an end to this rally if it disappoints.

Euro
Monday saw further progress towards the implementation of the third Greek bailout, with both the Lithuanian and Latvian parliaments voting to approve the proposal. Today it will also undergo debate in Spain, Estonia and Austria. However, the key potential sticking point for the process remains the Bundestag, due to vote on Wednesday. While Chancellor Angela Merkel undeniably faces revolt from a number of party members on the vote the expectation remains for a positive result. Thursday’s European Central Bank (ECB) repayment deadline could thus prove to be a rallying point for the common currency should Greece successfully meet it.

US Dollar
The ‘Greenback’ has been doing relatively well this week, in spite of an unexpected dip on the back of a poor Empire Manufacturing index. Although the stabilisation of the Yuan had assuaged fears of an oncoming currency war and its potential knock-on effect on the US economy, drops on Chinese stocks overnight have led to increased caution from traders afraid of further devaluations. Tomorrow’s US Consumer Price Index data and the release of the Federal Open Market Committee meeting minutes for July could stand to restore confidence in the US Dollar, however, and push it higher against the majors.

Australian Dollar
The Reserve Bank of Australia (RBA) meeting minutes for August proved to be somewhat hawkish this morning, with Governor Glenn Stevens appearing more optimistic about the domestic economy than previously. Further turmoil on the Chinese stock markets, however, quickly put a dampener on the report as concerns over further devaluation of the Yuan began to grow once more. Consequently the ‘Aussie’ has entered another general downturn with little in the way of upcoming data this week to offer any potential rally.

New Zealand Dollar
Optimism has picked up the fortunes of the ‘Kiwi’ ahead of tonight’s GlobalDairyTrade auction and expectations that the price of milk powder will finally increase again after a significant run of decreases in previous weeks. A potential improvement for the value of New Zealand’s primary export has naturally encouraged traders to return to the risk-sensitive currency, particularly as its closest neighbour remains relatively weak.

Canadian Dollar
Low oil prices have continued to erode the ‘Loonie’ this week. With the Chinese stock market dropping yet again last night, reigniting concerns that the Yuan may face further depreciations from the People’s Bank of China (PBoC), the values of both Brent and US crude have slipped to trade at $48.39 and $41.52 respectively. Although Friday’s domestic Retail Sales data and Consumer Price Index could offer potential for the currency to rally, increasing concern over the global commodity markets, and China in particular, may ultimately overshadow the figures.

As of Tuesday, 18th August 2015, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.42, GBP USD exchange rate was 1.5659, GBP AUD exchange rate was 2.1347, GBP NZD exchange rate was 2.3777, GBP CAD exchange rate was 2.0444, and GBP CNY exchange rate was 10.0123.

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