GBP EUR Exchange Rate Dips, GBP AUD & GBP NZD Rates Spiral

June 11, 2013 - Written by David Woodsmith

STORY LINK GBP EUR Exchange Rate Dips, GBP AUD & GBP NZD Rates Spiral

The Bank of Japan’s gung-ho attitude towards its monetary policy during the past nine months has had a considerable effect on the relative levels of the Japanese Yen as well as several of the other sixteen most-actively traded global currencies.

Last night’s Asian session re-enforced the important role which the Bank of Japan plays in the global markets, as the Japanese central bank announced its latest policy announcement. Following the BoJ’s announcement of a massive extension to its already hefty Quantitative Easing programme earlier in the year, expectations were rife that last night’s announcement might bring news of further ‘kitchen sink’ measures. It therefore came as a significant surprise when Japan’s policymakers opted not to increase its ultra-loose monetary policy stance by printing more Yen. Furthermore, the statement which accompanied the BoJ’s decision made no mention of the prospect of any further increase to Japan’s asset purchase programme for later in the year and this omission, in combination with the decision to maintain the status quo this month, caused global appetite to risk to drain from the collective minds of investors.

The flight to safety which ensued has hit the high-yielding commodity-driven currencies hard, sending the Pound to New Zealand Dollar exchange rate (currency : GBP NZD) back above the psychologically key two to one level for the first week since the start of September, 2012. The Sterling to Australian Dollar exchange rate (currency : GBP AUD) has followed suit, gaining the best part of a percentage point on the day to trade up to as high as 1.6670.

Elsewhere, the euro registered limited gains against most of the other majors during early trading today as French President Francois Hollande boldly declared that the eurozone’s debt crisis is now over. The Pound to euro exchange rate (currency : GBP EUR) briefly dipped below the 1.1700 threshold following the announcement, but the pair was trading back up towards the mid-1.1700s by the middle part of the European equities session as investors expressed their concern that Germany’s constitutional court was challenging the ECB’s promise to do ‘whatever it takes’ to preserve the single currency.

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