The Pound Sterling to Chinese Yuan (GBP/CNY) and Australian Dollar (GBP/AUD) exchange rates retained earlier gains in the second half of Thursday’s trading while the Pound to Canadian Dollar (GBP/CAD) and New Zealand Dollar (GBP/NZD) exchange rates fell.
Bank of England (BoE) Governor Mark Carney spoke during Thursday’s trading and allowed the Pound to advance against a host of other majors while the central banker talked of inflation and interest rate hikes.
Economist Vicky Redwood stated: ‘The Bank of England’s latest inflation report has confirmed that the MPC thinks that deflation is now on the horizon, but that this will be fairly short-lived. With the MPC fairly relaxed about the prospect of deflation, we still think there is a reasonable chance of a hike before the end of this year.’
The Pound Sterling to Chinese Yuan (GBP/CNY), Australian Dollar (GBP/AUD) and New Zealand Dollar (GBP/NZD) exchange rates recorded gains in the first half of Thursday’s European trading, while the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate weakened.
The British currency was able to advance when the Australian Unemployment Rate increased from 6.1% to 6.4% in January, a significant increase from the 6.2% forecast.
Furthermore, the New Zealand Business Performance of Manufacturing Index fell from 57.1 to 50.9 in January, dangerously close to the 50.0 benchmark which separates expansion from contraction.
Earlier… The Pound Sterling to Chinese Yuan (GBP/CNY) exchange rate softened in Wednesday’s European session while the Pound Sterling to Canadian Dollar (GBP/CAD), Australian Dollar (GBP/AUD) and New Zealand Dollar (GBP/NZD) exchange rates recorded gains.
The Pound has remained relatively resilient during the week as investor confidence in the UK economic recovery increases.
Strategist Lee Hardman stated: ‘Some of the pessimism toward the UK economy at the end of last year seemed to have eased as recent data suggested the recovery here is solid.’
The Pound Sterling to Canadian Dollar (GBP/CAD) and Australian Dollar (GBP/AUD) exchange rates recorded gains in Tuesday’s European session while the Pound Sterling to Chinese Yuan Renminbi (GBP/CNY) and New Zealand Dollar (GBP/NZD) exchange rates softened.
The Pound Sterling exchange rate was offered a little support when UK Manufacturing Production figures fell less than economists had forecast. In December on the year, the manufacturing sector fell from 3.0% to 2.4%—a more favourable ecostat than the 2.0% prediction.
However, UK Industrial Production slipped from 1.1% to 0.5% in the same time period—a decline accredited to maintenance on oil and gas fields in the North Sea. The fall in the industrial sector offers support to those who believe the UK economic recovery is slowing.
Oil Prices Weigh on Canadian Dollar to Pound Sterling (CAD/GBP) Exchange Rate
Meanwhile, the Canadian Dollar broadly softened as oil prices took another tumble. Since mid-2014 the price of black gold has depreciated by around 60%.
The ‘Loonie’ to Pound Sterling (CAD/GBP) exchange rate had been offered some support on Monday after Canadian Housing Starts picked up pace and rose above forecasts in January at 187.3K.
Royal Bank economist Laura Cooper stated: ‘The expected slowing in housing starts in energy dependent regions in January failed to materialize, indicating that, at this stage, the commodity price plunge is not yet negatively feeding through to confidence channels and into homebuilding activity.’
‘Weakness also has yet to show up in the labour markets of oil-dependent provinces; however, recent reports indicate that existing home sales fell sharply in these regions in the month and downside risks to the resilience of these housing markets remain.’
Thursday’s Canadian New Housing Price Index could have an influence on the Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate if it prints out of line with economists’ 1.7% forecast.
Meanwhile, the Chinese Yuan remained relatively sturdy in Tuesday’s trading despite a fall in Chinese inflation. The Consumer Price Index (CPI) tumbled further than economists had forecast to reach 0.8% on the year in January—a five-year low. December had seen inflation reside at 1.5% and experts predicted a softer drop to 1.0%.
However, the weak inflation figures has seen speculation rise regarding another People’s Bank of China (PBoC) rate cut.
Economist Chi Lo commented: ‘The inflation number is bad news for the economy because it underscores our reading of the deflationary drag on the economy, which has been going on for at least two decades.’
‘On the investment perspective, it may not be so bad because the deflationary drag has put pressure on the PBoC and Beijing to keep an easing bias which are good for asset prices going forward.’
As a result of the possible PBoC rate cut, the Australian and New Zealand Dollars were offered a little bit of cushioning. As both Australia and New Zealand’s largest trading partner, any developments in China can have a major impact on the ‘Aussie’ and the ‘Kiwi’.
The New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate advanced as investors viewed the recent shift in stance from the Reserve Bank of New Zealand (RBNZ) regarding monetary policy as a favourable development. The RBNZ announced it would be keeping the official cash rate (OCR) on hold instead of recommencing its tightening cycle—a favourable development when central banks the world over are cutting rates.
ANZ strategist David Croy commented: ‘The TWI is back above where it was before the January 29th RBNZ OCR review, which many, including ourselves, saw as a triumph in terms of rebalancing the mix of monetary conditions.’
‘The trouble is, when everyone else is cutting rates, standing your ground is considered to be going against the grain.’
The New Zealand Dollar could fluctuate on Tuesday with the release of Card Spending figures. The month of January is expected to record 0.2% growth. The biggest event for the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate this week will come in the form of Australia’s Employment Change and Unemployment Rate figures on Thursday.
If the Unemployment Rate increases from 6.1% to 6.2% as economists have forecast, the ‘Aussie’ could soften significantly against other majors.
Pound Sterling Exchange Rate Forecast: GBP/CAD, GBP/AUD, GBP/NZD, GBP/CNY
The Pound Sterling exchange rate is likely to experience significant swings on Thursday with the release of the Bank of England (BoE) inflation report. Economists are struggling to forecast the outcome of Thursday’s release with the price of oil contributing significantly to global consumer price drops.
In addition, BoE Governor Mark Carney has previously stated that inflation could temporarily dip into negative territory in the near future.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is hovering at 1.9013. The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trading in the region of 1.9581. The Pound Sterling to Chinese Yuan (GBP/CNY) exchange rate is reaching 9.5008. The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is trending at levels of 2.0572.
