Sterling continues its decline on the Euro ahead of BoE meeting

Claire Hogarth09/Oct/2014Currency Updates

GBP

Another day of limited data emerging from the UK saw the Pound gaining on greenback during early afternoon trading on Wednesday. Cable increased by 0.25% and continued its advance since Monday, having plummeted 3.5% in a fortnight before this week. This after HBOS announced its Halifax House Price Index for September which, while a very volatile figure, showed house prices increased in the UK MoM from static to 0.6% despite falling YoY from 9.7% to 9.6%. In spite of this data, the Dollar was able to recover as the day progressed and finished London trading where it began on the UK currency.

A further decline on the Euro saw Sterling fall 0.4% against the single currency and in the process reach its weakest position in three weeks.

At midday today the BoE Monetary Policy Committee will be meeting and announcing its interest rate decision with no change from its benchmark 0.5% rate expected.

EUR

The single currency continued its advance on both the Dollar and the Pound during London trading on Wednesday. After losing 8.5% of its value in the last three months against the Dollar, the Euro has now regained 2% on the greenback since last Friday, climbing close to 0.9% yesterday. For a third successive day the Euro strengthened against Sterling, this time by 0.4% and has now climbed 0.7% this week despite continuing concerns over a possible recession on the horizon.

While a quiet day for data on Wednesday within the Eurozone, the ECB will, at 9:00am today be releasing its monthly report in Frankfurt. This report, which providing articles on a wide range of topics related to the tasks of the ECB, will be followed at 4:00pm London time by a speech by ECB President Draghi. Draghi is expected to continue to talk down the Euro, potentially hinting at possible further stimulus given that the last couple of rounds have been largely unsuccessful.

USD

After gaining against most of its 31 major peers in early afternoon the Dollar weakened overall in the lead up to the Fed’s publication of its latest FOMC meeting minutes, which took place after the London close.

These were somewhat more dovish than expected. A “number” of participants worried about the impact of slower foreign growth on the US economy, and, surprisingly, “some” worried openly about Eurozone sluggishness and its impact on US Dollar appreciation and the US external sector. Although “some members” could mean just two, this is a departure from Federal Reserve policy of leaving comments on the US Dollar to the Treasury. The US Dollar continued its moderate decline against major currencies after the market digested the minutes.

The US Dollar Index fell by 0.8% against its major peers overnight and 0.6% against GBP as a result of the Fed minutes.

Rest of the world

The consumer price index in Chile increased by the most in six months in September and as a result, pushed the annual rate of inflation in the South American country to 4.9%, its highest level in more than five years. A surge in food costs has contributed to the Chilean Peso losing 16% of its value in the last twelve months and, after the Argentine Peso, is now the worst performing emerging market currency.

Print

Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.