Foreign Exchange Rates - GBP EUR Rate Drops Ahead of BoE Minutes, USD Weakens

20 Apr 2011 at 8 AM - Written by John Cameron

STORY LINK Foreign Exchange Rates - GBP EUR Rate Drops Ahead of BoE Minutes, USD Weakens

The Pound Euro exchange rate (GBP EUR) is 1.1346. The Pound Dollar exchange rate (GBP USD) is 1.6379.

Japanese trade data for March, which was released during last night’s Asian session, came out significantly worse than analysts had anticipated.

The figures showed that Japan’s trade balance stands at JPY196.50bn versus expectations of JPY645.40bn. The numbers also showed that Japanese exports are contracting by an annualised 2.2%, which is a much faster rate than had been expected. This is the first decline in Japanese exports for sixteen months.

The disappointing figures have been blamed on the decimating effect of the recent earthquake and tsunami in the world’s third largest economy. Many commentators have suggested that the effects of Japan’s recent natural disasters may be more deep-set than had previously estimated, casting doubt on the global economic recovery. If these doubts prove to be well-founded, then the US Dollar is likely to gain safe haven support in the markets.

Elsewhere, the Canadian Dollar gained ground during yesterday’s North American session following the release of domestic CPI Inflation figures for March. The numbers showed a sharp rise in the rate of price rises in Canada from 2.2% in February to 3.3% last month, causing investors to upwardly revise their predictions for Canadian interest rate rises in the next 12 months. The inflation data caused the GBP CAD rate to drop by almost 2c from above 1.5700 down to 1.5541in the direct aftermath of the release. However, CAD gains were tempered by a continuation of the drop-off in commodity prices, which is likely to hit the Canadian economy hard if it continues.

The main risk event for Sterling today comes at 0930 BST, when the Minutes of the Bank of England’s Monetary Policy Committee Meeting for April are released. It is highly likely that the minutes will show that members Weale, Dale and Sentence have once again voted for a rate hike. If they were joined by another MPC member, then the Pound could gain some limited support. The tone of the minutes will also closely be watched and any deviation from the Bank’s recent dovish line could also assist the Pound.

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