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Pound slumps thanks to surge in BoE interest rate cut speculation

business-articlesPound slumps thanks to surge in BoE interest rate cut speculation
  • Pound slides as UK growth contracts on the month
  • US dollar support limited thanks to US-China trade deal anticipation
  • Market sentiment fails to boost New Zealand dollar
 
 
Rising odds of BoE interest rate cut weigh heavily on pound
 
A surprise -0.3% monthly UK growth contraction saw the pound fall sharply out of favour at the start of the week.
 
Although the three-month rolling growth figure proved more positive, clocking in at 0.1%, this was not enough to ease worries over the health of the economic outlook.
 
This latest deterioration in UK growth also fuelled bets that the Bank of England (BoE) could cut interest rates imminently, with sentiment among policymakers turning increasingly dovish.
 
With further dovish comments expected this week the potential for a GBP exchange rate recovery looks limited.
 
 
Stronger inflation could boost US dollar 
 
With markets bracing for the US and China to sign off their phase one trade agreement, support for the safe-haven US dollar proved muted.
 
USD exchange rates could find a rallying point this afternoon, however, if December’s consumer price index data improves as forecast.
 
A stronger headline inflation rate would further diminish the case for future Federal Reserve interest rate cuts. 
 
If price pressures fail to pick up as anticipated, though, the US dollar may struggle to gain any fresh traction.
 
 
New Zealand dollar looks for boost on food inflation data
 
Anticipation ahead of the US-China trade agreement failed to shore up the risk-sensitive New Zealand dollar yesterday.
 
Lingering worries over the health of the global trade outlook kept NZD exchange rates on the back foot, particularly in the absence of any fresh domestic data.
 
However, the New Zealand dollar could trend higher this evening if December’s food price inflation data accelerated.
 
 
Upcoming Data:
 
Tuesday, 14th January 2020
13:30 USD Consumer Price Index
21:45 NZD Food Price Index
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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