GBP EUR, GBP AUD & GBP NZD Exchange Rates Under Threat

Published: Tuesday, 21 May 2013 09:00 BST - Written by John Cameron

STORY LINK GBP EUR, GBP AUD & GBP NZD Exchange Rates Under Threat

This morning’s session, from the perspective of the Pound Sterling, at least, is likely to be dominated by the release of a raft of price data which may alter investors’ perspective on the future direction of the Bank of England’s monetary policy. The key headline figure to look out for comes in the form of April’s annualised Consumer Price Index figure, purely and simply because it is the benchmark which the British government uses in order to gauge the UK’s macroeconomic situation. March’s year-on-year CPI figure showed at 2.8% and analysts’ expectations are that today’s release will show that the rate of British price rises has dropped off to 2.6%. The Bank of England stated earlier in the year that it expected CPI inflation to rise above 3.0% during the middle to latter part of 2013, so a decrease in the key inflation figure to 2.6% would provide the UK’s central bank with renewed leeway to further loosen its policy stance should it deem it necessary.

A showing of 2.6% would therefore be likely to stoke market rumours that an increase to Britain’s Quantitative Easing policy might be on the cards. The Bank’s nine-man Monetary Policy Committee has so far avoided the temptation to add to the £375bn worth of funds which have thus far been allocated to the scheme during 2013, at least in part because of concerns that British price rises might be starting to pick up momentum. With current Bank of Canada Governor Mark Carney taking over the top job at Threadneedle Street next month, a dip in UK inflation today would be likely to fuel market rumours that Carney will stamp his authority on the austere institution by immediately attempting to convince the Monetary Policy Committee that more QE is necessary to dislodge the UK economy from its current low/zero growth rut. Such an outcome would be likely to send the Pound to euro exchange rate (currency : GBP EUR) down towards the 1.1600 level once more.

Elsewhere, yesterday’s session was marked by a firming of global commodities prices which favoured the Australian and New Zealand Dollars. A repeat performance today would be likely to elicit further downside for the Pound to Australian Dollar (currency : GBP AUD) and Pound to New Zealand Dollar (currency : GBP NZD) exchange rates.

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