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July 2017

Sterling slides on Bank of England comments

Published: Monday 14 August 2017

  • Sterling slides on Bank of England comments
  • USD awaits Federal Reserve Chair’s testimony
  • Bank of Canada likely to hold interest rates
  • GBP-AUD breaks lower
By David Johnson
Well done Johanna Konta for breaking into the last four at Wimbledon in impressive style. You definitely earned this rest day. Good luck Mr Murray in your Quarter Final today.

The Sterling – Euro exchange rate is back down to levels we haven’t seen since last November. A number of comments from dovish Bank of England (BoE) members and Vince Cable hinted that the BoE is not likely to raise interest rates for quite some time and that, ahead of the UK Employment data this morning, was enough to undermine the Pound. This is obviously excellent news for exporters, who are clearly taking advantage of the attractive GBP buying opportunity, but is a nervous time for importers who failed to manage the risk of a Sterling fall. Sterling could recover if there is an improvement in the Unemployment rate from the already terrific 4.6% and the Pound would benefit even more if wage inflation has picked up. That latter point would counter yesterday’s central bank comments. However, EU Industrial Production data, due at 09:00 GMT, is forecast to be positive, so strength in the Euro and a continuation of this downward move can’t be ruled out.

The Pound also fell against the US Dollar for all the same reasons, but this afternoon’s speech from Federal Reserve Chair, Janet Yellen, is crucial to the path for the USD. Mrs Yellen is testifying to Congress about current and future Federal Reserve policy, so there is scope for fresh insight there. That will be followed, later in the day, by the Federal Reserve’s Beige Book. This is a regional view of the US economy and it forms part of the agenda for the next Federal Open Market Committee (FOMC) meeting, so it is influential.  Currently, in spite of the losses of the past few days, the GBP-USD rate is still in an upward trend.

This afternoon brings the Bank of Canada’s (BoC) interest rate decision. No change is expected in their 0.5% base rate, but the statement and press conference could offer insight into the BoC’s view of the Canadian economy and its prospects. Expect Canadian Dollar volatility around 14:00 GMT.

Sterling’s fall has also triggered a technical break in the Sterling – Australian Dollar rate. Traders are targeting A$1.66 and possible A$1.62 after the support at A$1.68 was broken. Worth knowing if you need to buy Aussie Dollars in the short term.

The New Zealand Dollar hasn’t made the same sort of gains, largely due to an announcement of a NZ$1 billion fund to stimulate the building of 60,000 fresh dwellings. That’s a good news story for the NZ construction sector, but it shows that the Reserve Bank of New Zeeland is using alternatives to interest rate movements to try to cool the house price boom. More supply should equal slower house price inflation and lessen the need for rate hikes. There is still a healthy uptrend in the GBP-NZD rate that started back in September and the bottom of that range is now NZ$1.73.

And, in a sad indictment of modern ways, a Chinese company set up a share scheme for umbrellas in a system akin to the bike share schemes in many cities. The flaw in their plan to offer umbrellas at 50 Yuan an hour was that there was no penalty for non-return. As a consequence, nearly all of their 300,000 umbrellas went missing in the first few days of the scheme. Too trusting, maybe?

Corny chat up lines and the responses

Feel my shirt. That’s boyfriend material.
It looks a little clingy and hard to maintain.

Do you believe in love at first sight, or should I walk past again?
Go ahead. I much prefer a moving target.

You know, you look a lot like my next girlfriend.
And you look exactly like the guy I turned down two seconds from now.
I just Googled “sexy” and a picture of you came up.
You’ll get the same result if you search for ‘not interested’ or ‘out of your league’…
For more information, infographics and the latest currency insights, visit www.halofinancial.com/news