Pound returns to multi-month highs before growth data

UK news might have been lacking yesterday but that didn’t stop the pound striking new multi-month highs against the Canadian, Australian and New Zealand dollars. Sterling was also able to claw back some of this week’s losses against the euro and edge higher against the US dollar.

GBP/EUR advanced from €1.1731 to €1.1817, GBP/USD jumped from $1.2807 to brush $1.2900, GBP/AUD hit AU$1.7233 (its best level since September 2016), GBP/NZD gained two cents to achieve NZ$1.8676 (its strongest rate since last July) while GBP/CAD remained close to seven-month highs at C$1.7475.

What impact could today’s ECB decision have on the euro? Keep scrolling to find out…

What’s been happening?

A blank economic calendar for the UK left the pound to be moved by external developments yesterday, and a combination of profit-taking, US news and trade concerns ensured the British currency came out on top against most of its rivals.

While the euro edged away from its recent highs ahead of the European Central Bank’s (ECB) interest rate decision, demand for the US dollar eased as President Donald Trump unveiled disappointing tax plans. The main development was the decision to slash US corporation tax from 35% to 15%, but fears that this move could result in a ballooning US budget deficit left the US dollar struggling.

Meanwhile, a tweet from Trump condemning Canada’s perceived injustices against US dairy farmers inspired concerns that New Zealand (the world’s largest exporter of dairy products) could come under fire next, resulting in significant New Zealand dollar losses.

Demand for the Australian dollar also remained tepid after domestic inflation data fell short, reducing the odds of the Reserve Bank of Australia (RBA) increasing interest rates.

What’s coming up?

Today’s big news item is the European Central Bank’s (ECB) interest rate decision. No changes to monetary policy are expected, but the tone and content of President Mario Draghi’s accompanying statement could inspire euro movement.

Any hints that the central bank is preparing to taper its quantitative easing programme would give the euro a boost and could drive GBP/EUR back to this week’s lowest levels.

Other news includes US trade balance, wholesale inventories and durable goods orders data. A trio of positive results would support US interest rate hike expectations and could give the US dollar a bit of a lift.

We’ll finally see some UK data on Friday, in the form of the GfK consumer confidence index and the nation’s first quarter growth data.

Signs that the post-Brexit economic slowdown predicted before the EU referendum is becoming reality would be pound-negative and may leave GBP exchange rates softer before the weekend.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil looks after our large corporate clients, providing dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.