Pound rises as markets flee US dollar

7 months ago


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The latest US data was keeping global volatility alive and well, so markets headed for the relative safety of pound Sterling yesterday.
 


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Daily Market Analysis


February 16th 2018

 

Pound rises as markets flee US dollar



The latest US data was keeping global volatility alive and well, so markets headed for the relative safety of pound Sterling yesterday.


The pound is largely on weak form ahead of this morning's UK data. The GBP/EUR exchange rate is down -0.1% to €1.1268, although GBP/USD is up 0.1% to US$1.4119. The GBP/AUD exchange rate is down -0.2% to AU$1.7714, GBP/NZD by a similar amount to NZ$1.9028, and GBP/CAD is flat at C$1.7609.


Keep reading to see what key economic release due later today could improve the odds of a Bank of England (BoE) interest rate hike…


 
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Today's Rate


Euro (EUR)
1.12731
US dollar (USD)
1.41252
Australian dollar (AUD)
1.76937
S. African rand (ZAR)
16.3924
Japanese yen (JPY)
149.592
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The rates above are using the British pound (GBP) as the base rate. All rates are for indication purposes only.
Prices can vary dramatically based on amount and delivery date.


 
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"Yesterday saw the pound largely on strong form, as markets looked for alternative stable currencies to the US dollar following the latest North American economic data."



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What’s been happening?

Yesterday saw the pound largely on strong form, as markets looked for alternative stable currencies to the US dollar following the latest North American economic data.


Sterling also received a modicum of support from a new survey published by the Bank of England that showed UK businesses were expecting to increase pay at an above-inflation pace this year, which would help to alleviate the strain on household budgets.


GBP/EUR was on the rise, even though the latest Eurozone trade balance figures showed that exports from the currency bloc had increased by a pace almost double that of imports, helping the overall surplus rise past forecasts of €22.3 billion to hit €23.8 billion.


Additionally, the day’s three speeches from officials at the European Central Bank (ECB) contained nothing to get markets excited about the monetary policy outlook for the currency bloc.


While much of yesterday’s US economic data disappointed forecasts, even the figures that performed better-than-expected weakened the US dollar.


GBP/USD rose after a stronger-than-expected uptick in producer prices, meaning manufacturers may soon have to start charging more for the goods they are making, contributing to even stronger inflation.


This could see the Federal Reserve having to hike interest rates faster than currently expected; and while this is usually a positive thing for the US dollar, stock markets are afraid of the impact of a sudden rise in borrowing costs upon companies and economy.


The volatility seen in the share market spilled over into the currency market and so traders have withdrawn from the US dollar into alternate stable currencies, such as pound Sterling.


 
 
What's coming up?

Today’s UK retail sales figures for January could further pile the pressure on the Bank of England to raise interest rates, as forecasts are for a strong uptick in growth upon December’s readings, which could indicate another acceleration in consumer price growth is on the way.


Meanwhile, the preliminary University of Michigan sentiment index for February is forecast to ease down from 95.7 to 95.5; unlikely to be enough of the development to cause any more volatility for the US dollar.


We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.


 
 


Reaz Rahman
Senior Dealer



Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.


  


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