GBP: Pound Stabilises Despite June Deficit Jump
Sterling plummeted yesterday against all of the majors as Brexit discussions reached an impasse and traders switched to the Euro in the wake of the European Central Bank’s interest rate decision.
But the Pound steadied against the majors on Friday, however, despite news that the UK deficit jumped in June.
A Treasury spokesman stated on the subject:
‘Today’s release shows that our national debt, at £65,000 for every household, is still too high and leaves us vulnerable to any future shocks. That is why we have a credible fiscal plan to get debt falling and deliver the sound public finances needed for a stronger economy and higher living standards.’
The UK borrowed £6.9bn in June – more than expected as a result of high inflation and contributions to the EU.
The crux of Sterling’s current inability to hold gains can be found in markets’ belief that the Bank of England (BoE) will refrain from adjusting interest rates with the UK economy struggling – so with Brexit negotiations failing to provide a semblance of assurance to anxious investors, the Pound will likely continue to fluctuate close to current lows in the near-term.
GBP/EUR: Pound Euro Plummets to 8-Month Low
The Pound dropped to an 8-month low against the Euro yesterday as Brexit talks failed to impress and the highly anticipated European Central Bank (ECB) meeting took place.
Whilst the ECB did not raise interest rates (as expected) or even hint at changes to its quantitative easing scheme, ECB Governor Mario Draghi gave a press conference where he directly stated that discussions regarding changes to QE could take place in early September.
While this may seem like an insignificant soundbite, it was enough to drive a great deal of support to the single currency – a currency that seems like a more stable option than Sterling to many traders at the moment.
With no significant Eurozone data releases to round off the trading week, movements will predominantly be dictated by Brexit discussions and profit-taking on the side of the Euro.
GBP/USD: Brexit Fears Return, Pound US Dollar Drops Half a Cent
The Pound fell half a cent against the US Dollar yesterday amid fears that a hard Brexit lacking an EU trade deal would hurt the UK economy, driving the more anxious traders away from Sterling.
On the data front, US weekly jobless claims fell to a near five-month low yesterday from previous 248k to 233k. The result led some investors to hope that sustained US labour market strength will keep the Federal Reserve on track to hike interest rates for the third time in 2017.
However, the Philadelphia Fed business outlook for July was not overly positive, dropping from previous 27.6% to 19.5%, below forecast of 23.0%. This enabled Sterling to regain a semblance of composure this against the ‘Greenback’.
GBP/CAD: Pound Canadian Dollar Steadies as Canada’s Inflation Data Looms
The Pound fell by roughly a cent against the Canadian Dollar yesterday, hitting its lowest level in four months.
The release of Canada’s inflation data looms, however, and currently the report is tipped to see CPI slide from 1.3% to 1.1%. This forecast has weighed on the ‘Loonie’, offering Sterling a brief respite.
GBP/AUD: Pound Australian Dollar Climbs as RBA’s Guy Debelle Quashes Rate Hike Hopes
Despite dropping yesterday, the Pound was able to climb this morning after the Reserve Bank of Australia’s Deputy Governor Guy Debelle took a decidedly dovish stance, dispelling hopes for a near-term rate hike:
‘There was a discussion of the neutral rate at the recent board meeting, as detailed in the minutes of the meeting released earlier in this week. No significance should be read into the fact the neutral rate was discussed at this particular meeting.’
This was a clear signal that the RBA is not specifically looking for an interest rate of 3.5% in the near future, something that removed a great deal of recent support for the ‘Aussie’ Dollar.
GBP/NZD: Pound New Zealand Dollar Hits Three-Week Low
The Pound fell some two cents against the New Zealand Dollar yesterday when Brexit talks failed to progress. This was the lowest level the Pound had struck against the ‘Kiwi’ Dollar in some three weeks, a drop assisted by the New Zealand Dollar seeing demand following the successful price increase of its key commodity in the fortnightly dairy auction.
As of this morning the pairing continues to shed gains and with little to no positive news regarding Sterling, this is likely to continue as the trading week draws to a close.
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