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Bank of England Comments Support Sterling, Euro Remains Unappealing as German Data Disappoints

 

Pound News: Bank of England Comments and Brexit Speculation Extends Pound Recovery

The Pound saw mixed movement yesterday but in the afternoon there was a jump in demand that helped it to recover much of the losses it had seen earlier in the week against major currency rivals. Investors were more willing to buy the Pound following the Bank of England’s (BoE) February policy decision.

While the bank cut its UK growth forecasts and left rates unchanged, BoE Governor Mark Carney indicated that markets didn’t necessarily need to prepare for an interest rate cut. Speculation that the Labour Party was still prepared for the possibility of a second Brexit referendum also bolstered Sterling support.

No notable UK data will be published today, leaving the Pound to react to any late-week Brexit developments. Market anticipation for the next parliamentary Brexit debate could also prevent investors from making sharp movements on the British currency.

 

Euro News: German Data Continues to Disappoint as EU Cuts Eurozone Forecasts

The Pound was able to easily climb versus the Euro yesterday as the latest Eurozone data and news kept pressure on the shared currency. Germany’s December industrial production results printed with a contraction of -0.4% rather than the expected 0.7%.

On top of this, the EU announced that it was cutting its 2019 growth forecasts for the Eurozone from 1.9% to just 1.3%. The lower outlook was due to various factors including the recession in Italy and fears that Germany could also fall into recession.

As German data has been particularly poor this week, the Euro could be influenced by German trade data from December today. French industrial production may cause Euro movement too.

 

US Dollar News: US Data and Safe Haven Demand Keeps US Dollar Sturdy

There hasn’t been much of a shift in US Dollar sentiment over the past day. The Pound was able to recover some of this week’s losses versus the firm US Dollar, but its gains were limited.

The US Dollar continues to see support thanks to market aversion to riskier trade-correlated currencies, as well as solid US data which leaves the US economic outlook strong.

No notable US data will be published today, but next week will see a slew of influential US ecostats including Q4 growth rate predictions and Personal Consumption Expenditure (PCE) results for December.

 

Canadian Dollar News: Oil Oversupply and Weak Canadian Data Weigh on ‘Loonie’

The Pound to Canadian Dollar exchange rate jumped and recovered its weekly losses yesterday afternoon, as CAD was kept under pressure by risk-aversion. Oil, Canada’s most lucrative commodity, was weaker due to concerns that the commodity was oversupplied.

Demand for the Canadian Dollar was also damper due to Wednesday’s disappointing Ivey PMI, which fell from 59.7 to 54.7 in January’s print.

Most of this week’s more influential Canadian ecostats will be published today, including January housing starts and especially January’s Canadian job market report. These figures are likely to influence Canadian Dollar movement.

 

Australian Dollar News: ‘Aussie’ Continues to Tumble on Dovish RBA Comments

On Wednesday, Reserve Bank of Australia (RBA) Governor Philip Lowe took a more dovish tone on Australian interest rates than the bank had taken in its meeting earlier in the week. He indicated that an interest rate cut was just as likely for the next move as a rate hike.

This shift in tone reflected recent disappointing Australian data and mortgage rate hikes from Australian banks. Since then, the Australian Dollar has been unappealing and GBP/AUD kept climbing throughout yesterday.

Investors may spend today digesting the week’s RBA news, and it’s unlikely the Australian Dollar will see a sudden jump in demand without stronger market risk-sentiment.

 

Upcoming Data

 

Friday, 8th February

00:30    RBA Statement of Monetary Policy

07:00    German Trade Balance

07:45    French Industrial Production

13:15    Canadian Housing Starts

13:30    Canadian Job Market Report

 

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To keep up to date with the Euro, visit the EUR blog in our Currency News section.

 

David Bayliss

Senior Currency Broker

dbb@fcgworld.co.uk

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