The Pound Sterling to Euro (GBP/EUR) exchange rate was trending lower in Thursday’s European trading while the Pound Sterling to Brazilian Real (GBP/BRL) and Pound Sterling to Thai Baht (GBP/THB) exchange rates were trending higher.
Thursday’s likely to be a big day for the Pound Sterling (GBP) exchange rate with the release of the Bank of England’s (BoE) latest interest rate decision. Although the BoE isn’t likely to move the interest rate benchmark away from the current 0.50%, the event has caused some significant movement in the past.
Additionally, the meeting minutes which will be made available toward the end of the month could be of extreme interest to investors in the Pound (GBP), with there being an increased likelihood that a divergence amongst policymakers will emerge.
The past two meetings have seen two Monetary Policy Committee (MPC) members announce that the decision on whether to hike interest rates or not was a ‘finely balanced’ one.
Thai Baht (THB) Exchange Rate Falls with Consumer Confidence Pessimism
Meanwhile, the Thai Baht (THB) exchange rate was offered little support against the Pound (GBP) when Thai Consumer Confidence slipped in May. The Thai Consumer Confidence index fell from 76.6 to 75.6, rather than softening only slightly to 76.4 as forecast.
Thailand, known as the Land of a Thousand Smiles, has witnessed five consecutive months of declining confidence as exports continue to fall and retail oil prices increase. Thai citizens haven’t been optimistic about consumer conditions since June 2004. Any figure residing above 100.00 denotes optimism whereas below signals pessimism.
ANZ economist Weiwen Ng commented: ‘To us, the recent disinflation downdraft has yet to translate into a pickup in household spending. Low commodity prices have weighed on farmers’ income. Exports have also been weighed down by the strength of the Baht. This dynamic is reflected in the wariness of households to commit to purchasing major household items.’
The Bank of Thailand (BoT) has cut interest rates twice already this year and there could be more to come at the next policy meeting on June 10th.
Weiwen Ng continued: ‘Further monetary easing takes into account the absence of strong recovery and elevated real rates. We note a distinct shift in Bank of Thailand’s recent monetary policy stance, as they linked the monetary policy decision to the strength of the Baht.’
‘Concerns on the financial sector imbalances are taking a back seat for now. Still, we have reservations on the efficacy of the rate cuts on growth. Monetary easing can only mitigate the delay in fiscal stimulus, but is no panacea. Fiscal therapy needs to come through stronger.’
The Thai Baht to Pound Sterling (GBP/THB) exchange rate is trending in the region of 0.0193.
Brazilian Real (BRL) Exchange Rate Suffers Losses against Pound (GBP) after Rate Hike
Meanwhile, the Brazilian Real (BRL) exchange rate experienced some movement when the Central Bank of Brazil opted to increase interest rates from 13.25% to 13.75%. Interest rates in Brazil now reside at the highest level seen in over six year in a bid to tighten the economy and quash inflation which is currently residing at an 11-year high.
The Bank of Brazil’s monetary policy committee (Copom) also suggested that it many continue the rate hike cycle as it attempts to bring inflation to its 4.5% target.
Goldman Sachs economist Alberto Ramos commented: ‘It is the right decision and another step to rebuild policy credibility. We are coming relatively close to the end of the cycle, but the exchange rate and activity will determine whether we need one or two more hikes.’
However, it’s worth noting that the aggressive hikes could cause a recession in the Brazilian economy and more problems for the central bank and the Real (BRL).
The Brazilian Real to Pound Sterling (BRL/GBP) exchange rate is trending in the region of 0.2068.
Euro (EUR) Exchange Rate Sensitive Ahead of Friday’s IMF Repayment after Greece Rejects Reform Proposal
The Euro is trading amid ongoing Greek negotiations on Thursday which have placed massive amounts of pressure on the Euro (EUR) exchange rate in the past.
However, investors are hoping for a deal by the end of the week as Greece balances on the precipice of running out of money and has an International Monetary Fund (IMF) repayment due on Friday.
Thursday saw Greece reject its creditors reform proposal which cast doubt over whether a deal would be made in time for Friday’s IMF payment and increased the risk of a Grexit. A default could see the Euro (EUR) crash against other majors.
The Euro to Pound Sterling (EUR/GBP) exchange rate is trending in the region of 0.7364.
The Pound Sterling to Brazilian Real (GBP/BRL) exchange rate is trending in the region of 4.8230. The Pound Sterling to Thai Baht (GBP/THB) exchange rate is trending at 51.9600. The Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the vicinity of 1.3629.