The Pound has been trading higher against both the Australian and New Zealand Dollars (GBP/AUD, GBP/NZD) in Thursday’s session as sentiment in Sterling rebounded.
Theresa May Takes Over Brexit Talks and Investors Consider BoE Rate Hike
News that Theresa May would be taking direct control of the negotiations between Britain and Brussels buoyed the Pound, as she sidelined newly appointed Brexit Secretary Dominic Raab. Theresa May said:
‘I will lead the negotiations with the European Union, with the Secretary of State for Exiting the European Union deputising on my behalf. Both of us will be supported by the Cabinet Office Europe Unit and with this in mind the Europe Unit will have overall responsibility for the preparation and conduct of the negotiations, drawing upon support from DExEU and other departments as required.’
The news bolstered Sterling to allow the Pound exchange rate to reach a one-week high as investors placed their bets that a softer departure from the EU would take place. Investors in Sterling will be looking towards tomorrow’s Nationwide House Prices data which is expected to fall on the year in July, from 2.0% to 1.8%. Additionally, markets are hoping to see an interest rate hike from the Bank of England (BoE) next month which has bought Sterling some optimism.
Australian Inflation Disappoints Leaving RBA Rate Hike Less Likely
Meanwhile, Australian inflation fell below forecasts on Wednesday, coming in at 2.1% in Q2 on the year from the previous 1.9%, just slightly below the 2.2% expectation, marking the seventh reading in a row where the figures have disappointed. The ecostat is significant because the Reserve Bank of Australia (RBA) will be looking at inflation when it comes to monetary policy and interest rate decisions. Meanwhile, Australian households deal with other problems such as lacklustre wage growth and high levels of debt.
‘It seems likely that the word of the moment for the RBA is going to continue to be “gradual” [when it comes to rate adjustments] for some time yet.’
The Aussie Dollar has floundered a bit against currency majors so far this year, dropping in excess of 5.0% against the US Dollar (AUD/USD) and around 3.0% versus the Pound (AUD/GBP).
New Zealand Trade Deficit Reaches Largest in a Decade
In New Zealand, it’s a quiet end to the week in terms of economic data, with only the ANZ Consumer Confidence numbers due out on Thursday. The start of the week had been a little more exciting with the release of trade balance stats where the deficit widened to its most significant number for a June year in a decade.
Industry expert Dave Adair commented:
‘The last June surplus was in 2014, driven by high dairy export values. Exports dipped in 2015 leading to a deficit, which has widened since due to steadily rising imports.’
The Pound to New Zealand Dollar (GBP/NZD) exchange rate is trending at 1.9321. The Pound to Australian Dollar (GBP/AUD) exchange rate is reaching levels of 1.7747.