- Pound Sterling jumps despite BoE news – New PM fails to reassure investors
- Euro drops off on prior data – Industrial production fell in May
- US Dollar dips on the whole – Fed official calls for two 2016 rate hikes
- BoE rate decision surprises – Interest rates left on hold
Pound Trends Higher Vs Euro, US Dollar Following Bank of England Rate Decision
The Pound Sterling (GBP) to Euro (EUR) and US Dollar (USD) exchange rates gained yesterday after the Bank of England (BoE) opted to leave interest rates on hold at its latest policy gathering.
Recent commentary from BoE Governor Mark Carney had led analysts to bet that the central bank would slash rates and Sterling accordingly declined in the build up to the decision.
However, the benchmark rate was left at a record low 0.50% and GBP enjoyed an impressive relief rally after the decision.
The Pound largely held gains against its peers on Friday with the GBP/EUR exchange rate holding at 1.2008 and the GBP/USD exchange rate trending in the region of 1.3362.
Comments from BoE chief economist Andy Haldane did reduce the Pound’s shine however, with the industry expert asserting that additional stimulus would need to be introduced.
(Previously updated 14/07/2016)
The Pound has been faring incredibly well recently, on the hopes that an upcoming Bank of England (BoE) meeting will not result in an easing of monetary policy.
Both the Euro and US Dollar have been relatively undesirable to investors, on account of poor domestic data and concerns about the Fed, respectively.
UK Economic News; Pound Climbs ahead of Key BoE Interest Rate Decision
Although it seems unlikely to last, the Pound has been positive against virtually all of its peers lately, with its most notable gains consisting of 0.8% against the US Dollar (GBP USD), 0.9% against the Euro (GBP EUR) and 2.3% against the beleaguered Japanese Yen (GBP JPY).
Domestic data has been fairly limited this week, with the main source of input for the Pound being rapid political developments and the lingering threat of a BoE interest rate cut.
In terms of politics, the UK has undergone a rapid shift in its power makeup in the space of days; David Cameron is out, Theresa May is in and George Osborne has been replaced as Chancellor by Phillip Hammond.
The Pound actually continued to depreciate into the night, having only started to rise recently on the hope that BoE policy measures will not be as harsh as first thought.
Euro (EUR) and US Dollar (USD) Exchange Rates Mixed on Fed Hawkishness and Eurozone Data
The value of the Euro has been fairly low in most peer pairings today, with notable movements consisting of a gain of 1.7% against the Japanese Yen (EUR JPY) and losses of -0.7% against the Pound (EUR GBP) and -0.4% against the Australian Dollar (EUR AUD). A slight rise has been seen against the US Dollar (EUR USD).
This lack of real confidence in the Euro stems from yesterday’s domestic data, which saw finalised inflation rates in June come in mixed across the board, along with the May industrial production results also falling on the month and the year.
The US Dollar has been low overall recently, with its only real gain being by 1.5% against the Japanese Yen (USD JPY). Against the Pound (USD GBP), the Dollar has fallen by -0.9%, while a minor decline has also been witnessed against the Euro (USD EUR).
The latest news to come out of the US has come from Fed official Patrick Harker, who is an alternative voting member of the Federal Open Market Committee (FOMC). Despite apparent economic headwinds, Harker has nonetheless stated that;
‘Considering the economic projections, I anticipate that it may be appropriate for up to two additional rate hikes this year. Brexit is low on my list of risks’.
Future GBP, EUR, USD Forecast; High Chances of BoE Rate Cut, Pound could Plummet
The Pound is expected to drop off heavily in the near-term at noon, assuming that that BoE cuts the interest rate below 0.50% as expected. At the time of writing, predictions were for an 80% chance of a cut, with the two most likely new rates being either 0.25% or 0%; at present, few have been toying with the idea of negative interest rates.
From the US, the early afternoon will bring the initial jobless and continuing claims stats for early July, which are expected to rise in both fields.
Current GBP, EUR, USD Exchange Rates
The Pound Euro (GBP EUR) exchange rate was trending in the region of 1.1912 and the Euro Pound (EUR GBP) exchange rate was trending in the region of 0.8396 today.
The Pound US Dollar (GBP USD) exchange rate was trending in the region of 1.3220 and the US Dollar Pound (USD GBP) exchange rate was trending in the region of 0.7565 today.
The Euro US Dollar (EUR USD) exchange rate was trending in the region of 0.8396 and the US Dollar Euro (USD EUR) exchange rate was trending in the region of 0.9015 today.