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18th September 2017 - Exchange Rates News written by TorFX for

18th September 2017 News: Sterling Slips from Highs after Last Week’s Bank of England Optimism

Pound Sterling (GBP)

The Pound saw a considerably strong performance last week as investors digested the latest Bank of England (BoE) news, which was surprisingly hawkish in many ways.

The bank did leave monetary policy frozen as expected, but investors were surprised with the meeting minutes, which indicated that most of the Monetary Policy Committee (MPC) was indeed feeling the pressure from strong UK inflation.

This was followed by hawkish speeches from BoE Governor Mark Carney and MPC member Gertjan Vlieghe. Both officials indicated that the bank may even need to hike UK interest rates in the coming months.

Overall, investors have had plenty of reason to be more hawkish on the Pound and speculation for future BoE meetings could keep it stronger in the coming weeks. Still, the British currency slipped slightly from its highs when markets opened on Monday morning.

US Dollar (USD)

The Pound to US Dollar exchange rate rocketed last week, reaching its best levels since the days following the 2016 Brexit vote. Sterling was so strong that it pushed back even a recovering US Dollar.

August’s US inflation results beat expectations, bolstering hopes that US inflation was rebounding and that the US economy would be able to support another 2017 interest rate hike.

In response to the news, Fed rate hike bets increased. Investor bets of a Fed rate hike in December are now around 56%, with only 42% betting that rates will be left frozen until 2018. A stronger US Dollar pushed Sterling back down from its highs on Monday morning.

Euro (EUR)

The Pound to Euro exchange rate saw multiple surges last week, taking it from relatively near 2017 lows, back up to its best levels in two months.

Investors haven’t been as eager to buy the Euro in recent sessions. While the Eurozone outlook is strong, an optimistic outlook has largely been priced into the shared currency already. As a result, investors have been selling the overvalued Euro from its highs.

Without indication that the European Central Bank (ECB) could hike Eurozone interest rates in the foreseeable future, further gains for the Euro may be limited. Markets currently don’t expect rates to be tightened until the end of 2018 at the earliest.

Australian Dollar (AUD)

The Pound to Australian Dollar exchange rate soared following September’s Bank of England (BoE) policy decision. Sterling was able to easily capitalise against a weakened Australian Dollar, as a stronger US Dollar (USD) and higher Fed rate hike bets weighed on risk-correlated currencies like the ‘Aussie’.

In the coming days, the Australian Dollar could see stronger demand if the Reserve Bank of Australia’s (RBA) latest meeting minutes show any signs of hawkishness. If not however, the ‘Aussie’ could remain pressured by weak risk-sentiment.

New Zealand Dollar (NZD)

The Pound to New Zealand Dollar exchange rate saw similar movement to GBP/AUD last week, as Sterling capitalised on low risk-sentiment and surged against the ‘Kiwi’.

Uncertainty about New Zealand’s upcoming general election continues to put pressure on NZD too. The election will be held this upcoming Saturday.

GBP/NZD currently trends near its best levels since May, but the New Zealand Dollar could see stronger demand in the coming days if the upcoming dairy price auction and NZ Gross Domestic Product (GDP) results impress.

Canadian Dollar (CAD)

The Pound to Canadian Dollar exchange rate soared to its best levels in over a month in reaction to the latest Bank of England (BoE) news, despite the general sturdiness of the Canadian Dollar recently.

At the beginning of September, the Bank of Canada (BOC) surprised markets by hiking interest rates. On Friday, Canada’s August inflation results will come out and this will give markets a better idea of how justified the BOC decision was.

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