Pound Rallies on Hawkish Offering from BoE?s McCafferty

Published: 13 Jul at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, China,

Pound Sterling (GBP)
Sterling has risen by over 0.3% against the Euro and US Dollar today, thanks to words from Bank of England (BoE) policymaker Ian McCafferty.
As well as stating that he will continue to support interest rate hikes in the future, McCafferty also toyed with the idea of unwinding the BoE’s considerable quantitative easing balance sheet. Both statements were considered extremely hawkish, which overrode any negative impacts from the other UK news.
This consisted of a series of warning signals from the Office of Budget Responsibility (OBR), along with a BoE announcement that credit defaults were rising.
The next major UK news will come on Tuesday, covering inflation in June. Forecasts are for a minor slowdown from 2.9% to 2.7%, which could relieve the current UK wage squeeze to some extent.

Euro (EUR)
With a trio of slowing inflation rate stats coming on Thursday, the Euro has tumbled against the Pound and US Dollar.
This weakness comes ahead of Dutch and Eurozone trade balance stats on Friday, which are predicted to show a rise on previous surplus figures.

US Dollar (USD)
On the second day of testimony from Fed Chair Janet Yellen, the US Dollar has advanced against the Euro but fallen against the Pound.
This comes after Yellen previously warned that the pace of Fed interest rate hikes could slow, due to weak inflation.
She has since balanced the statement, stressing that is risk on inflation is ‘two-sided’. This implies that Yellen thinks inflation could also rise, which may restart the Fed’s pace of interest rate hikes.
The first US data on Friday will be inflation rate figures for June. These are predicted to show a slight annual slowdown, which would tie into Yellen’s recent dovish comments and could weaken the US Dollar.

Australian Dollar (AUD)
With US Dollar traders still somewhat uncertain about the path of Fed monetary policy, the Australian Dollar has risen sharply against its regular peers.
In closer news, rising trading figures from China have also raised confidence in the Australian economy and pushed up the AUD.
The coming Tuesday will bring Reserve Bank of Australia (RBA) minutes for the July meeting. The RBA disappointed traders in July by not hinting at a future interest rate hike, so any clarification on the matter could push the AUD even higher.

New Zealand Dollar (NZD)
In a similar situation to the Australian Dollar, the New Zealand Dollar has appreciated thanks to US instability and strong data from China.
The latest NZ news has seen consumer confidence fall slightly in July, which makes the recent NZD rally mainly down to external factors.
Sunday’s NZ ecostats will consist of a measure of services sector activity in July. The measure is forecast to show a slight slowdown, but still a high level of overall economic involvement.

Canadian Dollar (CAD)
The Canadian Dollar has been on a rollercoaster ride between Wednesday and Thursday, initially soaring when the Bank of Canada (BOC) raised interest rates from 0.50% to 0.75%.
Since then, however, excessive profit-taking has caused the Canadian Dollar to slump against most of its regular peers.
The next notable CA data will be inflation-based, on July 21st. Forecasts are for an annual rise, which could trigger a CAD rally. Higher inflation would raise the chances of another BOC interest rate hike, something BOC Governor Stephen Poloz has not ruled out.

As of Thursday, 13th July 2017, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1355, GBP USD exchange rate was 1.294, GBP AUD exchange rate was 1.6738, GBP NZD exchange rate was 1.7677, GBP CAD exchange rate was 1.6475, and GBP CNY exchange rate was 8.778.

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