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15th February 2017 - Exchange Rates News written by TorFX for Exchange-Rate.net
The Pound slipped from its best levels during Tuesday's European session as the day's UK inflation results were ultimately disappointing to Sterling traders.
Analysts had expected the UK Consumer Price Index (CPI) to increase by 1.9%, but the print of 1.8% missed the mark and left investors doubting that this level of inflation was enough to pressure the Bank of England (BoE) into hiking UK interest rates. The latest increase in inflation was due to the lower value of the Pound, as well as rising costs of fuel and oil - indicating that these price pressures were not fundamental.
Sterling's losses worsened on Wednesday morning as the day's UK job results came in worse than expected in the three months through December. While the unemployment rate remained at 4.8% as expected, wages slumped and failed to meet projections. Wages came in at 2.6% in both bonus and excluding bonus prints, worsening concerns that the UK job market was not as healthy as hoped.
The Pound to US Dollar exchange rate slumped by around half a cent on Tuesday as the Pound was weakened by the day's underwhelming UK CPI figures while the US Dollar surged on the latest Federal Reserve rate hike bets.
Federal Reserve Chairwoman Janet Yellen took up a relatively hawkish tone in her speech to US Congress on Tuesday. She stated it would be 'unwise' to wait too long before hiking US rates again due to the current momentum of the US economy and rising inflation. As a result, bets of a March Fed rate hike increased and the US Dollar surged in response.
However, if US inflation fails to meet analyst expectations when it comes in on Wednesday, the 'Greenback' could weaken again.
The Pound to Euro exchange rate briefly plunged on Tuesday morning as investors reacted to disappointing UK inflation results.
However, GBP/EUR was able to recover most of its losses due to mixed Eurozone ecostats as well as ongoing concerns about the future of the Eurozone. Markets this week have been concerned about the rising popularity of French nationalist politician Marine Le Pen and the possibility she could win this year's French general election.
Yearly German Gross Domestic Product (GDP) for Q4 2016 came in at 1.2%, falling from 1.5% and failing to meet the expected 1.7%. As a result of disappointing growth figures around the bloc, the Eurozone's overall Q4 GDP projections came in at 1.7% year-on-year and 0.4% quarter-on-quarter, missing forecasts of 1.8% to 0.5% respectively.
The Pound to Australian Dollar exchange rate tumbled on Wednesday morning, despite recovering from a UK inflation inspired drop on Tuesday evening.
The latest Australian confidence figures impressed AUD traders. Westpac's February consumer confidence index improved from 97.4 to 99.6 with a change of 2.3%.
News that prices of iron ore, Australia's most lucrative commodity, had remained above US$90 per tonne during Wednesday's Asian session also bolstered support for the Australian Dollar.
The Pound to New Zealand Dollar exchange rate saw similar movements to GBP/AUD on Tuesday and Wednesday. A lack of fresh New Zealand ecostats have left the New Zealand Dollar largely moving in relation to its peers and global risk-sentiment.
While risky currencies took a hit on Tuesday afternoon due to higher Federal Reserve rate hike bets, the 'Kiwi' strengthened alongside the 'Aussie' on Wednesday morning regardless.
The Pound to Canadian Dollar exchange rate briefly plunged on Tuesday as UK inflation disappointed. While the pair recovered on Tuesday afternoon, it was edging down again on Wednesday due to recent oil prices.
While concerns remain that OPEC oil producers will not maintain oil output cap compliance for long and oil prices slipped on Wednesday, the commodity has held at over US$55 per barrel for most of the week which has benefitted the 'Loonie' Dollar.
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