The Pound weakened against its major peers on Tuesday as economists predicted that the session’s UK inflation data would show a fall, easing pressure on the Bank of England to raise interest rates and reducing Sterling’s appeal. Analysts are widely forecasting that Consumer Prices fell last month from 1.6% to 1.5%, a move away from the BoE’s target of 2%. The markets are also warning that even if inflation does ease to that level it will still be higher than wage growth. Concerns over Thursday’s Scottish referendum vote are also weighing upon the currency.
The US Dollar made gains against the Pound but eased slightly against other rivals after data released on Monday showed that industrial production in the US fell unexpectedly in August. Support for the currency remains however as many economists chose to ignore the report and instead focused on Wednesday’s upcoming Federal Reserve policy decision. The central bank is expected to show signs of edging closer to raising interest rates and to stay on target to end its quantitative easing programme in October.
The Euro is likely to come under further pressure on Tuesday as economists forecast that the latest ZEW Economic Sentiment data for Germany and the wider region will show that confidence across the 18-member currency bloc fell in September. The currency was also softened by concerns that a tentative ceasefire in Ukraine could collapse after renewed fighting at Donetsk airport.
The ‘Aussie’ was holding at a six-month low against the US Dollar following the release of the Reserve Bank of Australia’s policy meeting minutes. The RBA reiterated its decision to keep interest rates on hold for an extended period but also added that it believes that the currency remains above its ideal value.
New Zealand Dollar
The New Zealand Dollar regained ground against the Pound after the UK currency was weakened ahead of the release of domestic inflation data. Against the US Dollar, however the ‘Kiwi’ remains at a seven-month low as the markets turn their attention to the Federal Reserve’s upcoming policy meeting.
The ‘Loonie’ remains under pressure against its US counterpart as a result of expectations that the Federal Reserve will hike interest rates and taper its monthly bond-buying programme. The currency could see some movement later in the session if Manufacturing Sales come in positively.
South African Rand
The Rand remains under heavy pressure from bets that the US Federal Reserve will affirm the US economy is growing, and that the bank will signal an earlier hike in interest rates than investors had been expecting. Economists are also expecting Wednesday’s domestic inflation data to show an easing in August.
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