The Pound remained relatively stable yesterday as the headline inflation Consumer Price Index figure dipped slightly, in line with economists’ expectations, from 2.6% to 2.5% in August.
• GBP/EUR rises – towards 1.2500 on profit-taking stances.
• UK inflation drops slightly – BoE stimulus remains unlikely.
• GBP/USD stalls – ahead of yearly highs at 1.6306.
• ‘Greece must remain in the Eurozone’ – says Eurogroup Chairman Jean-Claude Juncker.
The Pound remained relatively stable yesterday as the headline inflation Consumer Price Index figure dipped slightly, in line with economists’ expectations, from 2.6% to 2.5% in August. The move came despite a rise in fuel and energy costs, which could potentially pave the way for a further bout of asset purchases from the Bank of England, but given the recent resilience in UK economic data, the UK Central Bank is unlikely to act any time soon unless conditions take a significant turn for the worse.
Yesterday Jean-Claude Juncker, Chairman of the Eurogroup of Finance Ministers, told the German press that a Greek exit from the Eurozone would be disastrous. He spoke of the progress that has been made in terms of bringing down labour costs in Greece and improving the nation’s competitiveness. Many commentators from Germany, including members of Angela Merkel’s Christian Democratic Union Party, have called for Greece’s ejection from the currency union out of resentment for the two bailout packages that the Hellenic nation has already received.
However Juncker, who is also the Prime Minister of Luxembourg, stated that “Europe as a whole would be weaker” if Greece were to leave the 17-nation bloc. The optimistic Euro comments were also accompanied by a more worrying notion; Juncker suggested that Spain would face tough demands in terms of structural reforms and spending cuts if it were to request assistance from the ECB/ESM. Spanish citizens are already committed to virile protests against austerity measure; a new set of cutbacks could spark mass civil unrest in the country.
As a result of increased anxiety surrounding the Spanish situation and profit-taking stances from the Euro’s recent strength against the Pound, the Sterling / Euro rate improved by just over half a cent.
Without sounding unprofessional, the Pound to US Dollar exchange rate was all over the place yesterday. A multitude of upward and downward swings, within a 0.5 cent range, ensured that Sterling did not find itself any closer to the elusive 1.6306 mark.
Three medium-volatility data sets reflected on the US economy in a positive light yesterday but nothing was able to distract investors from the latest Fed easing programme. The US Current Account Balance deficit narrowed from -$133.6B to -$117.4B in the second quarter, the US Housing Market Index increased from 37 to 40 in September, and the flow of long-term stocks, bonds, and money market funds increased from $9.3B to 67.8B.
The Sterling / Canadian Dollar exchange rate bounced around like a ball in a shallow box; GBP/CAD did not deviate from its 1.5810-1.5860 tight range and ended the day at 1.5840, almost the exact level that the pair opened at. It seems that Canadian growth projections are starting to cool-off for the remainder of the year, which has reduced the chances of an interest rate hike despite the Bank of Canada’s slightly hawkish bias.
The Australian Dollar continued to struggle against the Pound yesterday as markets digested the Reserve Bank of Australia’s warnings regarding the slowdown in economic output in China. However Sterling’s gains were fairly subdued and GBP/AUD consolidated at 1.5540 to mark a daily gain of just over 0.4 cents.
New Zealand Dollar
The Pound corrected lower by around 0.3 cents against the New Zealand Dollar yesterday despite the second quarter New Zealand Current Account deficit widening by more-than-expected to -NZ$1.797B. The quarterly fall led to an annual gap of over NZ$10.56B, which equates to around 5.2% of GDP. However the ‘Kiwi’ Dollar found itself mildly supported as dairy prices increased for the fourth straight auction in a row.
Data Released Today
JPY Bank of Japan Rate Decision (SEP 19)
09:30 GBP Bank of England Minutes
15:00 USD Existing Home Sales (AUG)
23:45 NZD Gross Domestic Product (QoQ) (2Q)
- Pound to Euro, US Dollar exchange rate: The Bank of England surprised absolutely nobody yesterday as they kept their benchmark interest rate at 0.5%
- The Pound remained on the defensive yesterday and slumped to near six week lows against the US Dollar exchange rate
- Pound to Euro, US Dollar exchange rate: A strong Spanish debt auction sent the Pound to Euro exchange rate down by around 0.5 cents yesterday
- Pound to Euro, US Dollar exchange rate: Another day another Dollar for Sterling yesterday as the Pound appreciated against all of the major currencies
- Pound to Euro, US Dollar exchange rate: The Pound remained under 1.24 against the Euro yesterday but the UK currency staged an impressive rally