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BoE Hawkishness Spurs Pound Exchange Rate Surge

Pound News: Odds of May BoE Rate Hike Improve

The Bank of England (BoE) proved more hawkish than anticipated at its February policy meeting, even though there was a unanimous vote to leave interest rates on hold.

As the Bank sounded a more optimistic note on UK growth and inflation prospects this encouraged investors to pile into the Pound (GBP), pushing it higher across the board.

Sterling may struggle to hold onto this positive momentum today, however, if the UK visible trade balance or NIESR gross domestic product estimate prove disappointing.

 

Euro News: Weak German Trade Data Limits EUR Demand

Demand for the Euro (EUR) was somewhat muted in the wake of Germany’s December trade data, with the surplus found to have narrowed sharply on the month.

While this undermined confidence in the robustness of the Eurozone’s powerhouse economy, however, EUR exchange rates continued to benefit from the wider sense of market risk aversion.

In the absence of any fresh Eurozone data today the appeal of the Euro is likely to remain rather limited.

 

US Dollar News: Fed Policymaker Talks Down Interest Rate Hike Pacing

Comments from Philadelphia Fed President Patrick Harker dampened the appeal of the US Dollar (USD) yesterday, seeming to diminish the odds of the central bank pursuing a more aggressive pace of interest rate hikes.

Although Harker is not a voting member of the Federal Open Market Committee (FOMC) in 2018 his preference for fewer rate hikes could reflect the view of other policymakers.

Even so, with market risk appetite still looking rather limited USD exchange rates are likely to hold onto some degree of strength heading into the weekend.

 

Canadian Dollar News: CAD Suffers From Extended Oil Price Slump

Confidence in the outlook of the Canadian housing market eased in the wake of a dip in both housing starts and the new housing price index.

Canadian Dollar (CAD) exchange rates also lost ground as oil prices extended their bearish run further, with rising US crude output weighing heavily on the market.

With forecasts pointing towards an uptick in January’s Canadian unemployment rate the mood towards the Canadian Dollar looks set to sour further this afternoon.

 

Australian Dollar News: RBA Expresses Disappointment in Wage Growth

Investors took no encouragement from Reserve Bank of Australia (RBA) Governor Philip Lowe’s latest comments, as he reiterated concern over household debt and weak wage growth.

With the RBA apparently set to leave interest rates on hold until wages show greater signs of picking up the appeal of the Australian Dollar (AUD) naturally diminished.

All in all, there seems to be little reason to favour the risk-sensitive AUD at this juncture.

 

New Zealand Dollar News: NZD Exchange Rates Slip as RBNZ Set to Hold Until 2019

Reserve Bank of New Zealand (RBNZ) Acting Governor Grant Spencer maintained a determinedly neutral policy stance on Thursday, signalling that interest rates will remain on hold until 2019.

This naturally put further pressure on New Zealand Dollar (NZD) exchange rates, leaving the antipodean currency with no real breathing room.

Unless there is a significant swing in market sentiment the New Zealand Dollar is unlikely to see particular improvement in the near term.

 

Upcoming Data

Friday, 9 February

09:30     UK Visible Trade Balance

13:00     UK NIESR Gross Domestic Product Estimate

13:30     Canadian Unemployment Rate

 

David Bayliss

Currency Dealer

01442 892 067

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