Pound Sterling (GBP) Exchange Rate Slumps after Carney Puts off Odds of BoE Hike
Unsurprisingly the Bank of England opted to leave interest rates unchanged at Thursday’s policy meeting, with Ian McCafferty remaining the sole dissenting hawk on the Monetary Policy Committee (MPC). With policymakers taking a more dovish view of the economy and failing to give any indications as to when the central bank’s first move on monetary tightening might come, this saw the Pound continue to weaken against rivals ahead of the weekend. Although some of those losses were regained this week after domestic inflation was revealed to have risen to 0.2% in December, Sterling has since returned to more bearish form following comments from BoE Governor Mark Carney. As wage growth is expected to have slowed further in the three months to November the Pound is likely to remain out of favour with investors.
Euro (EUR) Exchange Rate Trends Lower Ahead of ECB Rate Decision
Some of the safe-haven demand that had benefitted the Euro began to diminish this week as stock markets calmed somewhat. Downside risks to the Eurozone, however, have continued to mount as inflationary pressure was found to have remained weak in December and the German ZEW Economic Sentiment Survey showed that optimism within the economy had declined this year. As the European Central Bank (ECB) will meet on Thursday to discuss monetary policy traders have continued to speculate on the odds of further quantitative easing being introduced, although policymakers appear to remain divided on the matter.
US Dollar (USD) Conversion Rate Defies FOMC Dovishness
The ‘Greenback’ has remained on largely stronger form, in spite of members of the Federal Open Market Committee (FOMC) having recently indicated that the central bank’s target of four interest rate hikes in 2016 was unlikely to be met. While Advance Retail Sales declined over December traders were rapidly reassured by a stronger-than-expected University of Michigan Consumer Confidence Survey. As inflation within the world’s largest economy is forecast to have risen on the year in December the US Dollar may stand to make further gains against rivals this week.
Australian Dollar (AUD) Exchange Rate Bolstered despite Slowing Chinese Growth
Although December’s Australian Unemployment Rate surprised pundits by holding steady at 5.8% the ‘Aussie’ has struggled to maintain an uptrend, with base metals having remained in the region of multi-month lows on Chinese slowdown concerns. As the domestic economy continues to show strong signs of strength in spite of negative global headwinds, however, the Australian Dollar still looks to be stronger as the odds of a Reserve Bank of Australia (RBA) interest rate cut seem to decline. While China’s GDP was found to have slowed to its weakest level in twenty-five years on Tuesday the antipodean currency was boosted across the board as hopes of fresh economic stimulus increased risk demand.
New Zealand Dollar (NZD) Outlook Muted by Weakening Dairy Prices
The appeal of the ‘Kiwi’ has equally remained tied to developments in China, particularly as declining global demand weighs heavily on dairy prices. Fonterra recently revealed that production had dropped sharply in New Zealand at the end of the year, with the weakening of the dairy industry likely to drag on the wider economy. Nevertheless, in spite of prices at the GlobalDairyTrade auction falling once again, the New Zealand Dollar has been making gains amidst Tuesday’s more bullish market atmosphere.
Canadian Dollar (CAD) Exchange Rate Recovers as Oil Climbs from Twelve-Year Low
As sanctions were recently lifted from Iran the global oil supply glut looks set to persist over the coming year, with Brent crude having slipped to $27.67 in the hours after the announcement. However, the ‘Loonie’ has been recovering alongside oil prices in the wake of China’s latest GDP figures, as pundits are confident that demand is likely to pick up. Volatility is likely to return to the Canadian Dollar ahead of the Bank of Canada’s first interest rate decision of 2016, though, as some speculate that a rate cut could be possible.