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Fri 24 May 2024 19:57GMT

Pound (GBP) Exchange Rate Dips Despite the UK's Inflation Doubling in April

Published: 19 May at 12 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, India,

Pound (GBP)

The Pound (GBP) struggled this morning despite UK inflation more than doubling in April because of rising energy prices. Inflation is expected to head higher in the coming months as the UK economy continues to ease lockdown restrictions.

Jon Hudson, fund manager of Premier Miton UK Growth Fund, commented:

‘Inflation is likely to continue rising throughout the year as lockdowns ease, the economy recovers and various commodity shortages feed through to rising prices. The recent strength of Sterling will act as a buffer for inflation as it reduces the cost of imports.’

Sterling lost of its strength this week, however, as concerns continue to grow around the India variant of Covid-19. Any indications that this could threaten the Government’s roadmap out of lockdown would be GBP-negative.

Euro (EUR)

The Euro (EUR) rose today as the outlook for the Eurozone’s economy continues to improve thanks to the European Unions (EU) Covid-19 vaccination efforts.

Angel Talavera, economist at Oxford Economics, commented:

‘The recovery has already started in the eurozone, based on several high frequency indicators.’

EUR traders will be looking ahead to tomorrow’s speech from the European Central Bank’s (ECB) President Christine Lagarde.

Any upbeat forecasts for the Eurozone economy would be EUR-positive.

US Dollar (USD)

The US Dollar (USD) suffered this week because of improving risk sentiment. As a result, demand for the safe-haven ‘Greenback’ has diminished as the outlook for the global economy improves.

The Federal Reserve also said that it would maintain its accommodating monetary policy despite soaring inflation pressures in the United States. This has left many USD investors concerned about the outlook for the US economy in the months ahead.

If the Federal Reserve continues to enforce its dovish bias this week, we could see pressure begin to mount on the US Dollar.

Canadian Dollar (CAD)

The Canadian Dollar (CAD) weakened today as oil prices have softened because a modest drop in demand. This has weakened demand for the commodity-linked ‘Loonie’ today.

Instead, CAD investors will be awaiting the latest Canadian CPI figures. If there is a sharp rise in inflation, then we could see the Canadian Dollar head higher as this would boost the Bank of Canada’s (BoC) already hawkish stance.

Australian Dollar (AUD)

The Australian Dollar (AUD) slipped today as Australia’s Westpac consumer sentiment index reported a surprise drop in May.

New Zealand Dollar (NZD)

The New Zealand Dollar (NZD) suffered this week because of souring risk sentiment. The Indian variant of the coronavirus has dented confidence in risk-correlated currencies like the ‘Kiwi’.

As of Wednesday, 19th May 2021, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.159, GBP USD exchange rate was 1.4108, GBP AUD exchange rate was 1.8274, GBP NZD exchange rate was 1.9693, GBP CAD exchange rate was 1.7124, and GBP INR exchange rate was 103.3127.
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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