- Pound Sterling (GBP) exchange rates mixed today after consumer confidence falls
- Canadian Dollar (CAD) exchange rates soften as GDP growth slows
- US Dollar (USD) exchange rates continue to struggle against reduced Fed rate hike bets
- GBP forecast to hold gains over the weekend
Pound Sterling (GBP) Exchange Rates Mixed following Weak Consumer Confidence
Friday’s European session has marked the end of a sustained Pound Sterling (GBP) exchange rate relief rally as opinion polls show divergent results. Sterling racked up some notable gains in recent weeks amid easing ‘Brexit’ concerns as opinion polls showed a consistent lead for the ‘Remain’ campaign.
However, the latest opinion poll from YouGov gave ‘Leave’ the lead. This evokes memories of the Scottish referendum when opinion polls threw up increasingly divergent results. Despite this, however, the Pound avoided a larger depreciation with traders still showing confidence that the UK will vote to remain a member of the EU. Bloomberg currently sees the likelihood of a ‘Brexit’ at just 21%.
Also weighing on demand for the UK unit today was less-than-ideal domestic data. Of particular disappointment was April’s Consumer Confidence Survey which failed to meet with the market consensus of a drop from 0 to -1, with the result actually falling to -3.
‘Mixed messages about a post-Brexit world and the ongoing Eurozone crisis are casting a cloud over our economy,’ said Joe Staton of GfK. ‘The biggest dent to confidence comes from consumers’ depression [concerns] about the general economic situation in the UK for the next year, dropping 20 points in 12 months. Against this backdrop, even faith in our personal economic fortunes has taken a battering, contributing to the overall fall in the numbers.’
Canadian Dollar (CAD) Exchange Rates Edge Higher as Crude Oil Prices Rise
The combination of falling US oil stockpiles and a weaker US Dollar caused crude oil prices to reach 2016 highs. This caused the Canadian Dollar to advance versus many of its currency rivals.
‘The market is coming into better balance and we maintain the view that the current oversupply will flip into undersupply in the second half of the year,’ said analyst Jason Gammel.
However, there are many who think the oil rally is transitory.
‘Oil prices are caught in a spring fever and dismiss the persisting supply glut,’ said commodities researcher Norbert Ruecker. ‘Given rising Middle Eastern supplies and signs of excessively bullish sentiment, we see more downside than upside from today’s prices.’
The Canadian Dollar uptrend was somewhat pegged back, however, after domestic data confirmed an economic slowdown in February. Annual Gross Domestic Product met with the median market forecast drop from 1.6% to 1.5%, with the monthly reading contracting by -0.1%.
US Dollar (USD) Exchange Rates Struggle after Weak GDP Growth Weighs on Fed Rate Hike Bets
Data yesterday showed that annualised US Gross Domestic Product slowed beyond expectations in the first quarter. This, coupled with Federal Reserve Chairwoman Janet Yellen’s dovish interest rate decision press conference, has significantly reduced the odds of a June rate hike.
As a result of reduced Fed bets, the US Dollar dropped to a fresh 11-month low. Mixed results from US economic data has done little to offset Dollar losses.
In fact, an unexpected drop in April’s University of Michigan Confidence report compounded ‘Greenback’ (USD) losses. Domestic data is likely to be more impactful in the coming weeks after Yellen hinted that policy will now be data driven as concerns regarding external risks ease.
Euro strength is also contributing to US Dollar weakness thanks to EUR/USD negative correlation.
Lindsey Piegza, chief economist of Stifel, suggests that the Fed may avoid tightening monetary policy for the remainder of 2016.
A rate hike is ‘increasingly unlikely barring a surge in domestic activity and perceived calm on the international front. We are not overly optimistic such favourable conditions will be or can be met less than three months from now,’ Piegza wrote. The continuation of stagnant economic growth combined with slowing global growth will make it even more difficult for the Federal Open Market Committee (FOMC) to increase rates ‘once in the remaining nine months of 2016, if at all.’
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within the range of 1.8237 to 1.8366.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.5474 to 1.4664 during Friday’s European session.
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