Pound Sterling (GBP)
The Pound is sliding virtually across the board today, as markets await the Bank of England’s (BoE) incoming interest rate decision. Poor retail figures have further sapped appetite for the Pound, clouding the outlook for the economy and cooling hopes that growth may have rebounded after slowing in the first three months of the year. Sales fell -1.2% on the month, against predictions of 0.8%, while on the year sales grew 0.9% instead of rising 1.7% as forecast.
If the Monetary Policy Committee (MPC) continues to look past the poor data and keep rates frozen, the Pound could tumble. Markets are also keen to hear how policymakers believe the general election result will affect the economic and interest rate outlooks.
Continued uncertainty surrounding the Greek bailout is keeping the Euro on the decline. Eurogroup are due to discuss today whether the Greek government has done enough by way of austerity measures to unlock the next €7.5 billion rescue payment. Things are getting quite tense, as the Greek government has debt maturing in July that it must repay – without the additional funding the country could default, creating even more problems for the stricken economy.
US Dollar (USD)
The US Dollar is making solid advances today after the Federal Open Market Committee (FOMC) yesterday raised interest rates to 1.25%. While this was largely expected, so USD has done lots of appreciating in anticipation of this development, the FOMC also surprised with specifics on its plan to unwind its large asset pile being held as a result of quantitative easing during the financial crisis. Although no start date was given, policymakers have confirmed they will eventually start trimming the US$4.5 trillion balance sheet by $6 billion per month. This optimism in the health of the economy has therefore supported the US Dollar higher.
Australian Dollar (AUD)
Despite strong demand for the US Dollar, the Australian Dollar has also been able to record strong gains today. The labour market data released for May early this morning has proven overwhelmingly positive and has helped negate the impact of yesterday’s poor releases. 42,000 people entered the workforce last month; over four times what economists had been predicting and only slightly weaker than April’s figure of 46,000. Even more positively, there was another huge shift away from part time work towards full time work; the former fell by -10,000 while the latter rose 52,100. This was enough to push the unemployment rate down unexpectedly. Joblessness fell to 5.5% from 5.7%.
New Zealand Dollar (NZD)
The New Zealand Dollar is unsurprisingly on soft form. Not only is the strong US Dollar sapping demand for high-risk currencies, but also the positive factors driving the Australian Dollar higher means AUD is a far more attractive prospect than NZD for investors looking for a higher yield. Additionally, the ‘Kiwi’ is still smarting from last night’s first-quarter GDP figures. Quarter-on-quarter growth only rose from 0.4% to 0.5%, instead of to 0.7% as expected. Year-on-year growth slipped to 2.5% against predictions it would remain at 2.7%.
Canadian Dollar (CAD)
The Canadian Dollar had to contend with crashing oil prices yesterday, but even though crude continues to weaken today, CAD is largely on positive form. Remarks made yesterday by Bank of Canada (BOC) Governor Stephen Poloz have helped lift demand for the ‘Loonie’. Claiming that ‘interest rate cuts we put in place in 2015 have largely done their work’, the Governor said the next move would likely be a rate hike rather than a cut. Investors have brought forward their expectations for when borrowing costs would rise.