The British Pound (GBP) extended losses versus most of the majors (Euro and US Dollar) today following yesterday’s dovish speech from Bank of England Governor Mark Carney
In response to a speech from Bank of England (BoE) Governor Mark Carney, in which he stated that the likelihood of a near-term interest rate hike has been reduced thanks to weak global economic conditions, Pound Sterling exchange rates dived.
With the exception of commodity-correlated assets, the Pound extended losses across the board ahead of labour market data.
Meanwhile the Euro continues to rally versus its peers despite weak German Producer Prices data.
Here are some of latest fx rates as a reference:
On Thursday the Euro to British Pound exchange rate (EUR/GBP) converts at 0.855
FX markets see the pound vs euro exchange rate converting at 1.17.
FX markets see the pound vs us dollar exchange rate converting at 1.254.
The pound conversion rate (against australian dollar) is quoted at 1.92 AUD/GBP.
The GBP to NZD exchange rate converts at 2.116 today.
Please note: the FX rates above, updated 2nd May 2024, will have a commission applied by your typical high street bank. Currency brokers specialise in these type of foreign currency transactions and can save you up to 5% on international payments compared to the banks.
Pound Sterling to US Dollar Exchange Rate at Lowest Level since 2009 Following Carney Speech
The brief respite for Sterling didn’t last too long as the UK currency plunged to new depths on Tuesday. Sterling fell to its lowest level against the US Dollar since 2009, after the Bank of England Govenor Mark Carney signaled that an increase in UK interest rates was still some way off.
The UK Pound has declined in value on all but two trading days in 2016 so far and it’s a trend that is likely to continue with market sentiment deteriorating on a daily basis.
Sterling slipped to a low of 1.4132 against the U.S Dollar in the afternoon and that caps a remarkable sell-off that begun just before Christmas. In Mark Carney’s first speech of the year, he highlighted the escalating global risks and sluggish domestic recovery, which is keeping UK inflation lower for longer.
Even before his speech, forward contracts based on the Sterling overnight index average, showed traders weren’t fully pricing in a quarter-point increase to the UK interest rate until after March 2017.
The British asset actually had a good start to the day with British consumer prices accelerating at the fastest pace in a year at 0.2% on the month for November, but that seems a distant memory just 24 hours later.
GBP to EUR Exchange Rate Drops Below 1.30
Sterling weakened against all of the 16 most actively traded currencies and slipped conclusively below the 1.30 level versus the Euro to a fresh 12 month low of 1.2900.
The concerns surrounding the lack of economic momentum in the UK and the upcoming EU referendum has reduced demand for the Pound, which is also being battered the overwhelming decline in risk sentiment.
Data yesterday from China confirmed the slowest pace of economic expansion in 25-years and an Asian led financial crisis is becoming a real concern. RBS advised clients yesterday to “sell everything” amid warnings of a financial crisis as bad as what we experienced in 2008.
Foreign Currency Exchange Forecast: Tanking Oil Prices Weighing Heavily on Market Sentiment, RBS Advises to Invest in US and German Government Bonds
A meltdown in oil prices, which have dropped below $30 a barrel for the first time in 11 years, is driving the bearish sentiment to a large degree and banks are warning a further drop to as low as $10 a barrel this year.
RBS advised clients to seek refuge in U.S and German government bonds and that is likely to become a theme.
The relative security of the U.S Dollars means that demand is high and banks also project that the Pound will fall to sub 1.30 against the U.S Dollar by the end of the year, a scenario that could take Sterling under 1.20 versus the Euro.
The single currency continues to remain well insulated from the collapse in confidence in financial markets and is being used a funding currency. If UK interest rate hike bets keep getting pushed back, the Pound could easily fall beyond its current one-year low. While influential UK data is lacking until next week, the ECB's interest rate announcement is bound to be a cause of GBP/EUR exchange rate movement. Other news from the Eurozone to be aware of before the weekend includes the Markit Manufacturing/Services/Composite PMIs for the currency bloc's main economies. German Services and Manufacturing PMI is expected to dip slightly, which could have a negative impact on Euro demand.
Data Released 20th January 2016
U.K 09:30 Claimant Count (December)
- ILO Unemployment (3 Mths to November)
U.K 09:30 Average Weekly Earnings (3 Mths to November)
- Ex-Bonus
U.K 09:30 Producer Price Index (December)
GER 10:00 ZEW Economic Sentiment (January)
EU 10:00 Final HICP (December)
U.S 15:00 NAHB Homebuilders’ Sentiment (January)