Reduced Brexit Fears Continue to Buoy Pound, US Dollar Recovers Ground Despite Yellen Commentary

Published: 21 Jun at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada,

Pound Sterling
Although the Pound’s bullishness eased somewhat after Monday’s particularly strong gains it still remained on a stronger footing against many of its rivals. While new government debt was found to have risen by 9.1 billion Pounds in May this was overshadowed by ongoing Brexit speculation. Confidence was boosted further by the news that the take-up at the Bank of England’s (BoE) second additional liquidity auction had been the lowest since January 2015, underlining the apparent optimism in the markets.

Euro
Comments from European Central Bank (ECB) President Mario Draghi failed to encourage particular demand for the Euro on Tuesday, with the policymaker calling for greater fiscal reforms to support monetary policy. An unexpectedly strong ZEW Economic Sentiment Survey also seemed to suggest that confidence in the Eurozone’s powerhouse economy had picked up in June. Nevertheless, with safe-haven demand limited by the relative optimism of markets the single currency remained bearish.

US Dollar
Rather than weakening the ‘Greenback’ Fed Chair Janet Yellen helped to shore up demand for the currency, proving less dovish than investors had anticipated. Although Yellen acknowledged the negative headwinds that face the US economy and that the Fed will be taking a gradual approach to monetary tightening the US Dollar rallied in response. Markets remain in something of a jittery state ahead of the referendum result, with the Dollar also benefitting from a sharp decline in the Yen.

Australian Dollar
There was fresh sign of slowing within the Australian housing market today, with the first quarter House Price Index slipping from 8.7% to 6.8%. While investors were somewhat encouraged that the Reserve Bank of Australia (RBA) had indicated a continued reluctance to cut interest rates in the near future the ‘Aussie’ struggled to maintain a particularly bullish outlook. Forecasts still point towards the possibility of monetary easing in August, limiting the appeal of the antipodean currency.

New Zealand Dollar
Sustained risk appetite has helped to keep the ‘Kiwi’ on an uptrend across the board, with nothing in the way of domestic data to deter traders from piling into the higher-yielding currency. Lower odds of a Brexit or the Fed raising interest rates in the near future have improved the appeal of the New Zealand Dollar. However, if tonight’s Credit Card Spending report suggests a weakening in consumer confidence the ‘Kiwi’ could see its recent gains reversed.

Canadian Dollar
Although the commodity-correlated ‘Loonie’ benefitted from the general decrease in safe-haven demand this was largely counterbalanced by a renewed dip in the price of oil. Brent crude was trending back below US$50 per barrel, with oversupply concerns continuing to drag on oil ahead of the latest US inventories figure. Monday’s weaker-than-expected Wholesale Sales report also put downside pressure on the Canadian Dollar, particularly as confidence in the domestic economy remains generally muted.
As of Tuesday, 21st June 2016, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.3025, GBP USD exchange rate was 1.4664, GBP AUD exchange rate was 1.9667, GBP NZD exchange rate was 2.0578, and GBP CAD exchange rate was 1.8776.

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