The Pound found itself trending lower against a basket of other currency majors on Friday, including the US Dollar (GBP/USD) and Euro (GBP/EUR).
EUR Sinks as ECB Announces End of QE, but Interest Rates will Remain Low
Thursday was an interesting day for markets when the announced it would be phasing out its quantitative easing programme. Although it might seem like a positive development, markets’ enthusiasm for the Euro sank when it appeared that interest rates would remain stagnant through the summer of next year.
ING FX Strategist Viraj Patel commented:
‘The decision to more or less announce the end of QE–albeit in a tapered fashion until end 2018–was buffered by the caveat that the central bank will keep rates on hold “at least through the summer of 2019”. This could be described as a “give with one hand and take away with the other” ECB exit from unconventional policy–although the hand taking away feels more like a knockout blow for the Euro.’
The Euro slipped against other currency majors, tumbling by it’s biggest amount since 2016 versus the Dollar, with a 1.9% fall.
US and China Trade Tensions and Conservative Rebels in Focus for USD and GBP Exchange Rates
Meanwhile, US/China relations are back in the limelight as US President Donald Trump’s expected to pull the trigger on implementing $50bn’s worth of tariffs on Chinese imports. Markets will be watching for any other developments which could create trade conflict.
Later in the session, the final Eurozone Consumer Price Index figures will be out, followed by US University of Michigan Sentiment data. It’s a quiet day for UK data, meaning the Pound is likely to fluctuate on other factors such as Brexit and politics. Theresa May looks like she could be part of yet another Conservative rebels showdown in the week ahead, which could create some Sterling volatility.
Update: As the session continued, the Pound was able to climb versus the US Dollar (GBP/USD) as the trade war tensions between China and the US became heated. China responded by suggesting it would retaliate.
China’s commerce department issued a statement saying:
‘China is unwilling to have a trade war, but the Chinese side has no choice but to strongly oppose this, due to the United States’ myopic behaviour that will harm both parties. We will immediately introduce tariff measures of the same scale and strength. All the results from the previously reached by the two parties will be invalid.’
The Pound to US Dollar (GBP/USD) exchange rate is trending at 1.3294. The Pound to Euro (GBP/EUR) exchange rate is trending in the region of 1.1437.