The US dollar remained well supported on Friday, with the currency continuing to catch bids in light of the Federal Reserve’s recent hawkish shift.
Sterling appears to be consolidating these gains so far this morning, with GBP/EUR rangebound at €1.0994 and GBP/USD flat at $1.2956. GBP/CAD is buoyed at C$1.7131, while GBP/AUD and GBP/NZD tick higher to AU$1.7791 and NZ$1.9361, respectively.
In the spotlight today will be the Bank of England’s September rate decision. Will hints at a negative interest rate drag on GBP exchange rates this afternoon?
What’s been happening?The pound retained its bullish momentum through yesterday’s trading session, extending its recovery into its third consecutive day in response to hopes that the final wording of Boris Johnson’s controversial Internal Markets Bill may not break international law.
However, the upside in Sterling was tempered somewhat by the UK’s consumer price index as it revealed domestic inflation slowed to a four-year low in August, with the government’s Eat Out to Help Out scheme slashing the cost of living.
At the same time, the US dollar edged lower through Wednesday’s European trading session, dented by limited safe-haven demand and disappointing US retail sales figures in August.
These losses were then consolidated later in the evening as the Federal Reserve struck a dovish tone in its latest policy statement.
The euro, meanwhile, struggled to find support yesterday as the absence of any notable EUR data left the focus on Europe’s uphill battle against its coronavirus resurgence.
What’s coming up?Dominating today’s data calendar will be the Bank of England’s (BoE) latest rate decision later this afternoon.
While the BoE is widely expected to leave its monetary policy untouched this week, GBP investors will be on high alert for any hints that policymakers are still exploring the possibility of unconventional monetary policy.
This could see Sterling reverse some of its recent gains if the BoE is seen as putting serious thought into implementing negative interest rates.
For USD investors the focus will be on the latest US jobless claims, with the US dollar potentially facing some headwinds if last week’s initial claims remained elevated.
Across the Channel we could see the euro remain in a narrow range today, as the Eurozone’s latest CPI figures are expected to confirm the bloc slipped into a state of deflation in August for the first time since 2016.
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)