The Pound exchange rate continued to climb higher in Tuesday’s European session, making gains against the Euro (GBP/EUR), US Dollar (GBP/USD), Australian Dollar (GBP/AUD) and New Zealand Dollar (GBP/NZD). Brexit transition deal progress buoyed sterling, and latest ecostats showed a drop in the UK’s inflation level, meaning households are better off.
Update: As Tuesday’s session continued, the Pound eased back against the Dollar (GBP/USD) by around -0.20%, while still maintaining gains against the Euro (GBP/EUR), Australian Dollar (GBP/AUD) and New Zealand Dollar (GBP/NZD). Additionally, the Euro lost some support when the most recent ZEW surveys showed a bigger decline than predicted. The ZEW German Expectations Survey fell from 17.8 to 5.1, rather than the 13.0 forecast, while the Economic Sentiment Survey also slipped from 29.3 to 13.4. The fall is expected to have occured following tariff threats and trade war speculation.
UK Inflation Falls – GBP/USD Exchange Rate Above 1.40
Inflation has been incredibly high of late, but the latest reading showed a decline UK consumer prices from 3.0% to 2.7% on the year in February – the lowest since July 2017. The core reading slipped from 2.7% to 2.4%.
Looks increasingly likely that the UK is now past the peak of the recent spike in CPI #inflation and price growth will ease further over the coming months as the impact of the post-EU referendum decline in sterling drops out of the calculation pic.twitter.com/sRE2j6YBSO
— Suren Thiru (@Suren_Thiru) March 20, 2018
Richard Lim of Retail Economics commented: ‘Key areas driving the decline included transport and food which comprise a large chunk of expenditure, especially for the least affluent households. While real earnings remain in negative territory, the financial pinch will continue to ease and we expect growth to resurface by mid-2018.’
RBA Minutes – AUD Exchange Rate Offered Little Support as Iron Ore Falls
The latest Reserve Bank of Australia (RBA) meeting minutes released overnight yielded little fresh information for investors hoping for more news on interest rates. Additionally, the Aussie fluctuated on account of a decline in iron ore prices as speculation rose that there could be higher tariffs imposed on Chinese products. The Aussie Dollar resided close to three-month lows versus the US Dollar, as investors turned their attention to the upcoming Federal Reserve monetary policy meeting.
The Pound to Australian Dollar (GBP/AUD) exchange rate is trading at 1.8211.
New Zealand Dollar (NZD) awaiting Dairy Auction and RBNZ Official Cash Rate Decision
The New Zealand Dollar exchange rate also took a hit as markets entered risk-off mode. Markets will closely watch the next dairy auction taking place in Wednesday’s Pacific session to see if the price of New Zealand’s largest commodity will ease as expected. Wednesday will see the release of New Zealand Credit Card Spending data, ahead of the Reserve Bank of New Zealand (RBNZ) interest rate decision in Thursday’s antipodean session.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate is trading at 1.9444.
US Dollar Awaits Federal Open Market Committee (FOMC) Rate Decision
The US Federal Reserve is due to make its latest interest rate decision this week which markets believe will see another increase in rates. The decision will be followed up with a press conference with new Fed Chair Jerome Powell whose comments could create further market movement.
The Pound to US Dollar (GBP/USD) exchange rate is currently trading at 1.4026.
Euro Strengthens Versus US Dollar (EUR/USD) as ECB Shifts Focus
The Euro was offered some strength in Monday’s European session against its US Dollar counterpart when rumours regarding the European Central Bank’s (ECB) monetary policy path came to light. Reports suggest that the ECB policymakers are moving their debates to other topics such as how comfortable they are to hike interest rates by the middle of 2019. However, the Euro declined against the Pound (EUR/GBP) as Brexit optimism surfaced and the UK secured a transition deal to avoid a Brexit cliff edge.
The Pound to Euro (GBP/EUR) exchange rate is currently trading at 1.1393.