Pound Sterling (GBP)
The Pound received a boost yesterday after a surprising development in the latest Monetary Policy Committee (MPC) meeting. Markets had expected interest rates to be left on hold at 0.25%, but they had not expected three of the eight policymakers to vote in favour of hiking interest rates. This indicates that the surging rate of consumer price growth is beginning to worry officials, who had previously stated they would ‘look through’ inflation data to focus on the wider economy. The Pound rose on the hopes this means an interest rate hike is not far away.
Talks over the latest Greek bailout payment were weakening the Euro yesterday, but the outcome has pushed EUR exchange rates higher this morning. Eurogroup – the body of Eurozone Finance Ministers overseeing the bailout – finally agreed to give Greece €8.5 billion once the European Parliament has voted to approve the deal. The money is desperately needed; Greece has debt repayments due next month that, without the bailout, would have pushed the country into credit default. There are also promising signs that the International Monetary Fund (IMF) may yet join in with the bailout, even though it has spent many months lingering on the side lines.
US Dollar (USD)
The US Dollar was supported yesterday by an optimistic meeting from the Federal Open Market Committee (FOMC) on Wednesday. Rates were hiked and more details were given about plans to begin disposing of the huge pile of assets the Fed continues to hold since its quantitative easing programme. Today, however, the US Dollar is beginning to weaken. A strong performance over the past couple of days has created a good opportunity to profit, so markets are today realising their gains, which is pushing the US Dollar lower as more people want to sell it than buy it.
Australian Dollar (AUD)
The Australian Dollar spent yesterday buoyed by strong labour market data, even though the rising US Dollar was dampening appetite for commodity-correlated currencies like AUD. Today, the improving outlook on monetary policy is helping keep appetite for the Australian Dollar strong. According to Bloomberg, less-than half of economists surveyed expect the Reserve Bank of Australia (RBA) to leave interest rates at 1.5% for the next twelve months. While three financial institutions believe rates will be cut, seven expect to see at least one rate hike over the next four quarters. USD weakness is also benefitting the Australian Dollar today.
New Zealand Dollar (NZD)
Last night’s strong Business NZ performance of manufacturing index for May is helping to push the New Zealand Dollar higher today. April’s score was revised higher to 56.9, while the index accelerated to 58.5 during May. The fact that the markets have little appetite for the US Dollar today is also helping to keep the New Zealand Dollar on the ascent thanks to its status as a high-yielding commodity currency.
Canadian Dollar (CAD)
Crude oil prices are climbing steadily today, but the Canadian Dollar is being sold thanks to alarm after WTI crude prices fell below US$45 per barrel. There is no domestic data set for release today and the Australian Dollar and New Zealand Dollar are more attractive as commodity currencies, leaving the Canadian Dollar unappealing today.