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GBP Exchange Rates Climb on BoE Rate Hike Prospects

Published: 30 Oct at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, China, Germany,

GBP Exchange Rates Soar on BoE Rate Hike Anticipation

The Pound hit the ground running on Monday, filled with fresh vigour regarding the possibility of a rate hike on Thursday from the Bank of England (BoE).

Markets have all but priced in a rate hike, with last week’s better than forecast UK GDP print proving the deciding factor for many economists.

There remains a great deal of conjecture regarding how the bank will proceed after Thursday, however, with some positing that the bank could then shift back into an extended period of extreme caution.

EUR Limited by Disappointing German Inflation Print

The Euro fell against the majors today on some disappointing data from Germany.

Year-on-year inflation in Germany printed at 1.6% in October, below the previous period’s preliminary estimate of 1.8% and the forecast of 1.8%.

The month-on-month figure contracted at -0.1%.

The Euro also remains encumbered by the ongoing situation in Catalonia, with Catalan leader Carles Puigdemont having fled the country amid charges of rebellion.

Ultimately, the BoE is currently regarded as the more hawkish option compared to the European Central Bank (ECB), leaving GBP EUR firmly in the Pound’s favour.

Markets will, nonetheless, be keeping a keen eye on tomorrow’s Eurozone CPI and GDP figures, releases that could affect GBP EUR in the build-up to Thursday.

US Dollar (USD) Falls on Talks of Fed Chairman Replacement

The US Dollar stumbled today on news that Fed Governor Jerome Powell could be replacing Janet Yellen as Chairman of the Federal Reserve.

Whilst any shift in leadership in such a position is likely to cause volatility, the possibility that Jerome Powell could be overly dovish has limited demand for the ‘Greenback’.

Treasury Secretary Stephen Mnuchin claimed in September that the Whitehouse is ‘less concerned about inflation at the moment’, which could mean that US President Donald Trump could favour a dovish candidate who similarly reflects this sentiment.

Markets remain worried that Powell could potentially represent a shift in economic policy, even if he is regarded as the most similar of the candidates to Janet Yellen.

CAD Remains Encumbered by BoC Rate Decision

The Canadian Dollar continues to remain encumbered by last week’s dovish Bank of Canada (BoC) rate decision, a decision that saw interest rates left on hold as well as a dramatic reduction in the odds that the bank will bump them up for many months.

Tomorrow will feature the release of Canada’s year-on-year growth figures, with a slowdown expected from 3.8% to 3.5%.

If this does materialise then GBP CAD might further cement its gains.

AUD Limited by Falling Iron Ore Prices

The Australian Dollar fell in demand today as markets responded to a drop in iron ore prices.

Iron ore prices were revealed to have stumbled this morning as Chinese authorities made clear their intentions to curb pollution over the winter period by shutting down various steel mills.

This understandably knocked Australia’s biggest export down a peg and pushed GBP AUD even further into the Pound’s favour.

NZD Falls on Potential Widening of RBNZ Mandate

The New Zealand Dollar dropped in demand today on speculation that the Reserve Bank of New Zealand’s (RBNZ) mandate will be widened, an event that could see policymakers forced to tolerate inflation moving above previous target levels.

Finance Minister Grant Robertson asserted that the RBNZ might focus on other goals, such as employment when deciding changes to monetary stimulus.

The Pound retained its lead over the ‘Kiwi’ Dollar, propelled by rate hike bets for the BoE.

As of Monday, 30th October 2017, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1341, GBP USD exchange rate was 1.321, GBP AUD exchange rate was 1.716, GBP NZD exchange rate was 1.9199, GBP CAD exchange rate was 1.6944, and GBP CNY exchange rate was 8.7798.
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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