Pound Sterling (GBP) Exchange Rate Slumps Sharply on ‘Brexit’ Fears
Although Prime Minister David Cameron was successful in securing agreement on proposed reforms to the UK’s relationship with the EU, the Pound has had a rocky start to the week. London Mayor Boris Johnson came out in support of the ‘Leave’ campaign, increasing the odds of a potential ‘Brexit’ and driving Sterling down across the board. With referendum uncertainty likely to weigh on the UK economy in the coming months, the Pound is expected to remain on a weaker footing against rivals for the foreseeable future.
Euro (EUR) Exchange Rate Dented by Discouraging German Data
Germany’s economy does not appear to be defying global slowdown pressures anymore as the latest data showed that the country’s manufacturing sector had posted barely any growth in February. As the IFO Business Sentiment Survey also showed its weakest reading in a year, confidence in the Eurozone’s powerhouse economy has generally faltered. This all appears to be increasing the pressure on the European Central Bank (ECB) to implement further monetary loosening in March, particularly as inflationary pressure within the currency union is expected to have eased last month.
US Dollar (USD) Conversion Rate Trends Lower as Consumer Confidence Falls
The Federal Open Market Committee (FOMC) has been taking a less hawkish view of monetary policy in recent comments, a view encouraged by further disappointing US data. Despite a stronger-than-expected jump in domestic inflation, which rose from 0.7% to 1.4% in January, the US Dollar has been on less bullish form this week. Both the latest Manufacturing PMI and Consumer Confidence measures have shown marked declines on the month, suggesting that the world’s largest economy is not in as robust a state as policymakers might have hoped.
Australian Dollar (AUD) Exchange Rate Recovers from Disappointing Employment Figures
Investors were not impressed by January’s Australian employment figures, as the domestic Unemployment Rate unexpectedly surged from 5.8% to 6.0% to undermine November and December’s more bullish results. However, while the ‘Aussie’ initially dipped in response to this data, the antipodean currency has since recovered ground on the back of another global stock market rally. With the underlying fundamentals of the Australian economy still showing signs of strength in spite of wider pressures it seems unlikely that the Reserve Bank of Australia (RBA) will opt to loosen monetary policy next week.
New Zealand Dollar (NZD) Weakened with Increasing Odds of RBNZ Rate Cut
Markets have continued to price in an imminent interest rate cut from the Reserve Bank of New Zealand (RBNZ), weakening the ‘Kiwi’ against rivals. With the outlook of the New Zealand economy remaining muted in the wake of another session of dairy price declines and weakening consumer confidence, there has been rather limited incentive to buy into the New Zealand Dollar this week. However, an increase in risk appetite and the relative softening of the US Dollar have seen the South Pacific currency making some modest gains this week.
Canadian Dollar (CAD) Exchange Rate Dips as Inflation Rises
Canadian Retail Sales proved particularly disappointing over the December shopping period, contracting by -2.2% as consumers failed to spend. Although the January Consumer Price Index showed that inflationary pressure had risen further than expected to 2.0% this was not especially encouraging for the ‘Loonie’, as this is nearing the higher end of the Bank of Canada’s (BOC) target range. With oil prices remaining volatile, the increased chances of the BOC resorting to a fresh interest rate cut have diminished the appeal of the Canadian Dollar.