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Mon 6 Jul 2020 07:16GMT

British Pound Edges Away from Lows as Bank of England (BoE) Speculation Persists

Published: 23 Apr at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, France, Germany,

Pound Sterling (GBP)
Last week’s UK inflation data fell well short of expectations and comments from Bank of England (BoE) Governor Mark Carney were perceived as dovish by investors, causing Bank of England interest rate hike bets to slump. This caused broad Pound weakness throughout the week.

On Monday, Sterling was supported slightly against some majors thanks to comments from some analysts arguing that a May interest rate hike from the BoE was still possible.

However, if BoE interest rate hike bets remain low the Pound is likely to remain weak over the coming days. Investors will be focusing on comments from Bank of England officials, as well as Friday’s UK growth projections for Q1 2018.

Euro (EUR)
The Euro was able to hold against the Pound’s gains slightly on Monday, but the Pound to Euro exchange rate still edged higher throughout the day due to Bank of England (BoE) rate hike speculation.

Monday saw the publication of the Eurozone’s PMI projections for April, which largely beat expectations in major prints. However, while the Eurozone’s biggest economies appeared resilient there was reportedly more slowdown in smaller member states, which limited Euro appeal.

German confidence stats will be published on Tuesday, followed by French confidence on Wednesday, but Thursday’s European Central Bank (ECB) policy decision will likely be the event this week most likely to influence Euro trade.

US Dollar (USD)
Rising signs that the Federal Reserve could be on track to ramp up the pace of its 2018 interest rate hikes left the Pound to US Dollar exchange rate weaker on Monday. The Pound was unable to hold its ground against strengthening US Dollar.

The US Dollar was supported by strong performance in US 10-year bond yields in recent sessions, despite mixed US data. Chicago Fed’s national activity index unexpectedly tumbled to just 0.10, but Markit’s US PMI projections were largely better than expected.

US Dollar demand could continue to improve in the coming days if US ecostats such as new home sales and durable goods orders impress investors. However, the US Dollar could shed some of its recent gains if US data or political news disappoints investors.

Australian Dollar (AUD)
Falling Bank of England (BoE) interest rate hike bets and stronger commodity prices left the Pound to Australian Dollar exchange rate weaker last week, but on Monday the Pound was able to recover slightly against a slightly weaker ‘Aussie’.

Prices of Australia’s most lucrative commodity, iron ore, fell back from last week’s highs and the broad strength of the safe haven US Dollar (USD) left risky currencies like the Australian Dollar even less appealing.

The Australian Dollar could push GBP/AUD lower on Tuesday if Australia’s Q1 inflation rate report beats expectations. If the data is unsurprising though, the Australian Dollar is likely to continue to be driven by risk-sentiment.

New Zealand Dollar (NZD)
The Pound to New Zealand Dollar exchange rate was able to advance last week despite broad Pound weakness and the pair continued to advance on Monday.

A lack of supportive New Zealand data in recent sessions and expectations that the Reserve Bank of New Zealand (RBNZ) will leave NZ monetary policy frozen for the foreseeable future have left the risky New Zealand Dollar unappealing.

This week’s New Zealand data is unlikely to be hugely influential. If Thursday’s New Zealand trade results do not inspire NZD movement, the currency is more likely to be driven by risk-sentiment and political news.

Canadian Dollar (CAD)
The Pound to Canadian Dollar exchange rate strengthened on Monday, following the losses caused by falling Bank of England interest rate hike bets last week.

Despite some better-than-expected Canadian inflation data last Friday, Bank of Canada (BoC) Governor Stephen Poloz didn’t seem particularly surprised by the inflation figure. This indicated to investors that the bank’s monetary policy outlook was unchanged and the Canadian Dollar was sold as a result.

Poloz will be holding another speech on Wednesday, but unless he takes a surprisingly hawkish tone the Canadian Dollar is more likely to be driven by developments in trade news this week.
As of Monday, 23rd April 2018, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1415, GBP USD exchange rate was 1.3939, GBP AUD exchange rate was 1.8329, GBP NZD exchange rate was 1.9489, and GBP CAD exchange rate was 1.7904.
Dominic Lee About Author: (420 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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