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Pound Jumps Vs New Zealand Dollar, Turkish Lira Strengthens, GBP/EUR Awaiting Direction

August 7, 2019 11:14 am | Modified August 7, 2019 11:14 am
EUR, GBP, NZD, TRY, USD | BY Charlie Murray

Comments that the Federal Reserve has done enough with interest rates for now has ensured no fresh upside for the Pound – Dollar rate (GBP/USD), whilst the glimmer of a way ahead in finding a Brexit deal has also left Sterling – Euro (GBP/EUR) looking distinctly cool. Ongoing support for the Turkish Lira continues to buoy the currency and New Zealand’s central bank drove GBP/NZD to six-week highs with a surprise rate cut overnight.

As Fed Refuses to Respond to China Trade War, Cable Holds Fast

The British Pound – US Dollar exchange rate (GBP/USD) has been little changed in recent hours, with markets looking devoid of fresh information to work with. James Bullard, one of the Federal Reserve’s voting members, spoke yesterday but made clear that he felt US interest rates were now in the right region and that the central bank wouldn’t be responding to every turn in the escalating US trade war. The resolute stance here has arguably gone some way to help draw a line, at least temporarily, under the Greenback’s broader sell-off which has been seen over the last week.

Markets Stand Fast Despite Brexit Way Ahead Emerging

Media reports may be hinting that some cracks are beginning to appear in the European Union’s Brexit strategy, although the idea is yet to provide any meaningful support for the Pound – Euro exchange rate (GBP/EUR). Developments here would require the UK government to withdraw the so-called red-lines and the renegotiation process would apparently go beyond the current deadline of October 31st, but the idea that a route ahead may be possible is helping keep the Sterling – Euro rate above the close on two-year lows tested on Tuesday morning.

GBP/TRY Pushes Towards Fresh Lows For The Year

The Turkish Lira continues to outperform other emerging market currencies, with Sterling – Lira (GBP/TRY) coming close to year to date lows during Tuesday’s trade. Although dovish signals from the US Federal Reserve continue to make the Lira’s yield an attractive one, the trade isn’t entirely without risk. The threat of US sanctions on Ankara still looms, whilst mounting levels of bad commercial debt at the country’s banks could also weaken the currency.

Why Did it Move? Pound to New Zealand Dollar (GBP/NZD) Exchange Rate

Significant gains were seen for the Pound against the New Zealand Dollar overnight (GBP/NZD) after the country’s reserve bank surprised markets with an aggressive 50 basis point rate cut. A degree of policy easing had been expected, but the scale shocked many, with the Sterling – Kiwi rate adding as much as four-and-a-half cents at one point. The move is designed to drive inflation higher, with the New Zealand economy struggling in the face of a global economic slowdown and its heavy reliance on trade with China. There is however some concern at the scale of the move and the fact this gives the Reserve Bank of New Zealand less headroom to play with as the economic cycle progresses.

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