Pound Sterling (GBP) Declines after BoE Minutes
During the European session the Pound Sterling (GBP) exchange rate posted widespread declines. The GBP/EUR pairing fell to a low of 1.2613 while the GBP/USD exchange rate shed nearly 0.5%.
The minutes showed that the Monetary Policy Committee remained divided on the subject of interest rate increases again in October, with the vote holding at 2:7. In the minutes it was also stated that the Eurozone’s flagging performance was weighing on the UK, and that Britain’s inflation outlook didn’t justify a rate adjustment.
It was stated; ‘For most members, there remained insufficient evidence of prospective inflationary pressure to justify an immediate increase in Bank Rate. These members put forward a number of arguments on which they each placed different weights. CPI inflation was 1.2% in September, partly reflecting lower import prices. While it was appropriate for policy to look through the near-term effects of lower import prices on CPI inflation when indicators of cost and price pressures remained consistent with inflation returning to the target in the medium term, CPI inflation had fallen relative to an already weak outlook.’
As the week continues additional Pound Sterling (GBP) exchange rate movement could be triggered by the UK’s retail sales report. A surprise increase could bolster the Pound.
The GBP/EUR exchange rate is currently trending in the region of 1.2636.
US Dollar (USD) Could Soften if CPI Slows
Although investors have recently pared back their Federal Reserve interest rate hike expectations (undermining demand for the US Dollar) the ‘Greenback’ was able to adopt a stronger position against peers like the Pound and Euro on Wednesday.
While domestic concerns weighed on the European currencies, the US Dollar was trending slightly higher off the back of Tuesday’s above-forecast US existing home sales data.
With the US Consumer Price Index scheduled for release later today, additional US Dollar (USD) exchange rate fluctuations are more than likely.
If the pace of consumer price growth is shown to have slowed on an annual basis in September, easing from 1.7% to 1.6%, it would support the case in favour of the Federal Reserve maintaining low interest rates and could cause US Dollar depreciation.
The US will also be releasing MBA Mortgage Applications data.
The US Dollar to Pound Sterling (USD/GBP) exchange rate is currently trending in the region of 0.6239.
Euro (EUR) Fluctuating Amid Stimulus Speculation
Although economic reports for the Eurozone were lacking on Wednesday, the Euro still put on a mixed performance against several of its most traded peers.
The common currency strengthened against the Pound (EUR/GBP) following the release of pessimistic Bank of England meeting minutes, but lost ground against the US Dollar (EUR/USD) for a second day.
The patchy Euro trading was due to conflicting reports from the Eurozone regarding the introduction of additional fiscal stimulus.
In a recent Reuters report it was implied that the European Central Bank was contemplating purchasing corporate debt in order to bolster the currency blocs flagging economy. The news pushed the Euro lower across the board.
However, a ECB official has since contradicted this claim, allowing the Euro to recoup some of its losses.
That being said, if tomorrow’s stream of Markit Manufacturing/Services/Composite PMI’s for the Eurozone and its largest economies show the declines expected, Euro (EUR) exchange rate weakness can be expected.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.2694.
Indian Rupee (INR) Begins Session in Stronger Position
After gaining against several of its peers on the strength of better-than-forecast Chinese data, the emerging-market Indian Rupee began the local session trending slightly higher against the US Dollar (INR/USD).
With Indian economic reports in short supply this week, the direction taken by the Indian asset has largely been dictated by global economic developments.
If today’s US Consumer Price Index shows the slowing in inflation expected by economists the Rupee could advance on the US Dollar during North American trading.
The Indian Rupee also advanced on the British Pound (INR/GBP) following the release of pessimistic meeting minutes from the Bank of England.
The Pound Sterling to Indian Rupee (GBP/INR) exchange rate is currently trending in the region of 98.0780
