Outlook for the British Pound Against the Euro, US, Australian and Canadian Dollars
Global inflation developments have tended to dominate the markets, with the US dollar losing ground due to expectations that other global central banks, including the Bank of England, will tighten their policies.
There was a notable outperformance for the Australian and New Zealand dollars, with the US dollar losing ground while the British pound generally lost momentum.
Pound in Euro: Outlook GBP / EUR
The pound continued to benefit from net support from expectations that the Bank of England will take a short-term move to raise interest rates. There were also underlying reservations about the economic damage caused by high energy prices and speculative buying started to fade as markets sought better value elsewhere.
There was no major development in the eurozone before business confidence data at the weekend.
The exchange rate of the British pound against the euro (GBP / EUR) held around 1.1820 on Tuesday.
The latest inflation data will be a key market target when the market opens on Wednesday with consensus forecast for the year-on-year inflation rate to remain at 3.2% for September.
Markets will also be on high alert for any further comment from Bank of England officials.
Pound vs. dollar: GBP / USD outlook
The US dollar fell on Tuesday as sentiment was partly damaged by much weaker-than-expected industrial production data.
While markets remain confident that the Federal Reserve will continue to tighten policy at the November meeting, market attention has shifted slightly to potential action from other global central banks that would erode potential support from the American currency.
Overall, the dollar fell to its 3 week low and the pound / dollar (GBP / USD) exchange rate hit a one month high of 1.3780.
The US data timeline is light, but traders will continue to closely monitor comments from Federal Reserve officials.
British Pound to Australian Dollar: GBP / AUD Outlook
The Reserve Bank of Australia’s minutes were in line with market expectations, with the bank reiterating that the economic recovery had been delayed rather than derailed. He also reiterated that there would be no rate hike until inflation was stable in the 2-3% range.
Commodity prices will continue to be watched closely, with coal prices keeping a firm tone on Tuesday as China sought to store energy resources. The strength in commodities helped support the Australian currency and the Australian dollar exchange rate against the dollar (AUD / USD) was also boosted by short hedging as it posted 6 week highs around 0.7460.
Given the strong gains of the AUD, the exchange rate of the British Pound against the Australian Dollar (GBP / AUD) fell to 1.8440 and close to its 3-month low.
Canadian dollar pound: GBP / CAD outlook
The Bank of Canada’s (BoC) latest business outlook survey pointed to a strong economy, with businesses in high demand but also struggling on the supply side. There was further strong upward pressure on prices which maintained expectations of a more hawkish BoC policy
Against this backdrop, Wednesday’s latest CPI data will be important ahead of the BoC’s policy decision next week.
The Canadian dollar was boosted by strong oil prices and the dollar against the Canadian dollar fell to its lowest level in three months, although the currency slightly underperformed on the crosses after strong gains over the course of the year. last month.
The exchange rate of the British pound against the Canadian dollar (GBP / CAD) held steady just below 1.7000 at the start of Europe, with energy markets remaining a priority.
Pound sterling to New Zealand dollar: outlook GBP / NZD
New Zealand reported 94 new cases of the coronavirus on Tuesday, causing some discomfort, but the potential impact was offset by the vaccination program.
Following the much stronger inflation data, markets have also focused on Reserve Bank of New Zealand policy with heightened speculation that the central bank may decide on a 0.5% rate hike. of interest at the November policy meeting. This speculation was important to support the New Zealand dollar.
The latest New Zealand GDT auction data will be released on Tuesday, which will be important for underlying price trends in the crucial dairy sector.
Overall, the exchange rate of the British pound against the New Zealand dollar (GBP / NZD) retreated to its lowest 5-month level around 1.9280.