Exchange Rate Outlook: BoE and FOMC Minutes in Focus


Pound Sterling

The Pound tumbled against all of its major peers on Tuesday after data showed that UK inflation fell more than expected in July and that house price gains slowed in June. Investors were widely disappointed by the inflation report as it eased pressure on the Bank of England to raise interest rates before the end of the year. Sterling fell as investors pared back their bets for a rate hike. The currency regained some ground on Wednesday morning as investors looked ahead to the publication of the minutes from the BoE’s latest policy meeting.

US Dollar

The US Dollar climbed close to a ten-month high against the Euro and advanced to eleven-month highs against other peers after housing data offered further support to the ‘Greenback’. The currency could make further gains as investors look to tonight’s publication of the Federal Reserve’s latest policy meeting minutes. Economists will be looking for signs that the Central Bank is considering raising interest rates sooner-than-expected.

The Euro

The Euro was trading close to a ten-month low against the US Dollar after the US currency found support from positive economic data. The Euro, however, remains under heavy selling pressure as data out of the Eurozone continues to disappoint. Fears over deflation taking root and the European Central Bank introducing new stimulus measures is keeping demand for the single currency muted.

Australian Dollar

The ‘Aussie’ was weakened on Wednesday after Reserve Bank of Australia Governor Glenn Stevens talked down the currency. The Australian Dollar came under pressure after RBA Governor Stevens said the country’s economy needs an injection of confidence rather than lower interest rates to stimulate growth, signalling that monetary policy will probably remain unchanged.

New Zealand Dollar

The New Zealand Dollar fell to a five-month low against the US Dollar and other rivals as strong US data supported the ‘Greenback’. The ‘Kiwi’ meanwhile was continuing to come under pressure from Tuesday’s report by the government, which showed that it has cut its growth and fiscal surplus estimates.

Canadian Dollar

The Canadian Dollar briefly advanced to a three-month high against the weakened Pound on Tuesday as reduced risk aversion supported the ‘Loonie’. The currency eased however after a strong US Dollar saw investors favour the US currency over the Canadian one. Wednesday sees the release of the latest Canadian Wholesale Sales data.

South African Rand

The Rand weakened against several major peers after Moody’s credit rating agency downgraded all four of South Africa’s major banks and placed them on review for further cuts. The rating agency said the Reserve Bank had not fully protected African Bank’s creditors, raising questions about the quality of future support for other banks should they need it.

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