GBPEUR rates slide US interest rate stall
30 April, 2015
Yesterday may have well seen the start of the rot for GBP>EUR rates ahead of the UK general election. Despite the uncertainty surrounding the election itself and its ongoing discussion we have seen to date a strange situation develop, and many would argue it is a surprise that we have not seen a drop in rates sooner.
It was the mornings Eurozone business climate report that saw rates to begin to drop. Whilst a report of usually little impact it came in highly over expectation after a suggested contraction (0.32 from a predicted 0.21 and a previous 0.23). As a result the market reacted quickly and by midday the pound has lost around half a cent against the single currency. This was exacerbated further mid morning as data from the UK trade survey came in massively under expectation whilst a growth was predicted (down to 12 from a predicted 25 and a previous 18). Losses for the pound against the Euro continued in the afternoons trading and was not helped by the US Dollar. With announcement that US GDP had shrunk, whilst it allowed the pound to gain over a cent against the greenback, this only aided the Euros advances and by the close of business the Euro had gained over 1.5 cents against the pound.
Following a busy day on the market all eyes then focussed towards the much anticipated FED interest rate decision. Having been talked about for many months and also with a Summer hike hinted at in last month’s FOMC minutes, many predicted news of an increase in June. However this was not the case as the FED in fact downgraded their economic outlook. Perhaps aided in their decision by the mornings poor GDP figure, they were now suggesting that a hike may not occur until the 3rd quarter at the soonest. This did little to further weaken the dollar against the pound having already lost considerable ground in the morning, however it did lose another cent against the single currency.
Elsewhere and in other news of note the Royal Bank of New Zealand held their interest rate at 3.5%, avoiding any major swings for the Kiwi.
So today is likely to be another telling day as the mornings data is largely dominated by the Euro with German retail sales and unemployment released, followed closely by Eurozone unemployment and inflation data. This afternoon the focus shifts across the pond to the U.S for Jobless and Price and manufacturing index data. The big questions will no doubt be will the slide continue in GBP>EUR rates as we move ever closely to the election? Can the USD halt its recent losses despite the delay in the anticipated hike? As always with much going on if you have any upcoming transfers to make speak to your Currency Index broker today for some friendly guidance on how to avoid getting caught out by any sudden swings in rates.
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