Trade-weighted Sterling declines to five month low

  • All posts
    All posts|Currency Updates
    All posts|Currency Updates|International Trade
    All posts|In The News
    All posts|International Trade
    Charities & NGOs
    Currency Updates
    Currency Updates|In The News
    Fraud
    In The News
    In The News|Press
    International Trade
    Press
  • Latest

8 August 2017

thomasdodds

Sterling slipped to its weakest position in trade-weighted terms in five months on Monday with investors doubtful that the Bank of England will hike interest rates this year following last week’s cautious monetary policy statement.

T
he central bank voted 6-2 to keep interest rates unchanged at their record low level on Thursday, while revising down growth forecasts and suggesting that inflation could ease following the rebound in the Pound. Financial markets are now not pricing in a hike until as far out as August 2018 which has heaped renewed selling pressure back on the currency. Sterling also suffered from its worst daily decline against the Dollar in more than six weeks on Friday after a stronger-than-expected US labour report that kept alive hopes of a Federal Reserve rate hike in December.

With no economic news at all out of the UK today, traders will look ahead to Wednesday’s Inflation Report hearings where Governor of the Bank of England Mark Carney will be speaking at the House of Commons.

Fed member Bullard calms rate hike talk

President of the Saint Louis Fed James Bullard quelled talk of an imminent interest rate hike in the US yesterday, claiming that the Federal Reserve can leave interest rates where they are for now amid weak inflation. Bullard, who is currently not a voting member on the FOMC, suggested that inflation was not likely to rise much even if the US jobs market continued to improve. On a more hawkish note, he did suggest that the trend of 2% economic growth appeared intact in the US following an impressive rebound in activity in the second quarter of the year. However, traders mostly overlooked his comments and the US Dollar index ended the session only modestly higher.

Today bodes to be a similarly quiet day in the US with job openings data from JOLTS the only release of any note. Investors will already have one eye on Friday’s US inflation data.

Euro range bound during typically quiet August trading

The common currency was barely moved against the Dollar on Monday. Typically quiet August trading took over yesterday, ensuring that the Euro traded within a narrow band for much of the London session. The latest investor confidence index from Sentix did little to shift sentiment towards the currency after coming in marginally below forecast at 27.7 in August, around about its highest level in a decade. We think economic news will begin taking on slightly more importance in the next few weeks as investors determine whether the 10% appreciation in the currency so far this year has had any meaningful negative effect on the Euro-area economy.

With little in the way major economic releases on Tuesday the Euro is likely to remain fairly range bound for another day. French and German trade data is unlikely to rock the boat and will take a back seat this week in favour of developments abroad.