On 13 June, the UK government revealed legislation that would allow it to scrap parts of the Northern Ireland protocol.
- Pound vulnerable to easing UK inflation
- Canadian dollar looks for boost on stronger CPI
- Upcoming Fed policy announcement weighs on US dollar
Pound set to extend losses on weaker inflation
Worries over the risk of a no-deal Brexit continued to weigh on the pound yesterday as the Conservative leadership contest heated up further.
Further weakness could be in store for GBP exchange rates this morning on the back of May’s UK consumer price index data.
As forecasts point towards the headline inflation rate easing from 2.1% to 2.0% this would reduce the case for the Bank of England (BoE) to raise interest rates in the near future.
Unless inflationary pressure continues to push higher investors are likely to price in lower odds of an imminent BoE policy move.
Rising inflation to boost Canadian dollar
A surprise contraction in manufacturing sales undermined confidence in the outlook of the Canadian economy yesterday, putting fresh pressure on CAD exchange rates.
However, the mood towards the Canadian dollar could improve if today’s consumer price index data strengthens as anticipated.
If the headline inflation rate picks up from 2.0% to 2.1% on the year the risk of the Bank of Canada (BoC) adopting an increasingly dovish outlook would diminish.
A decline in US crude oil stockpiles, meanwhile, could encourage CAD exchange rates to trend higher as the oil market recovers further ground.
US dollar falters as anticipation mounts for Fed decision
Demand for the US dollar generally weakened as anticipation mounted for tonight’s Federal Open Market Committee (FOMC) rate announcement.
Although no change in interest rates is expected today investors are still bracing themselves for the latest indication of the Fed’s policy outlook.
As long as policymakers appear on course to cut interest rates in the near future the appeal of the US dollar is likely to diminish.
On the other hand, signs that the Fed could leave monetary policy on hold for a little longer could offer USD exchange rates a temporary rallying point.
Wednesday, 19th June 2019
09:30 GBP Consumer Price Index
13:30 CAD Consumer Price Index
19:00 USD Federal Open Market Committee Rate Decision
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