GBP USD Exchange Rate Dips To 6-Week Low, GBP EUR Rate Recovers On Spain Fears

Published: Tuesday, 23 October 2012 16:00 BST - Written by John Cameron

STORY LINK GBP USD Exchange Rate Dips To 6-Week Low, GBP EUR Rate Recovers On Spain Fears

As per expectations, the Bank of Canada’s policy committee elected to maintain its key lending rate at 1.00% earlier today. However, the Canadian Dollar has been strongly supported in the aftermath of the announcement thanks to the tone of the BoC’s accompanying statement which hinted that a rise in domestic interest rates will be needed before long. As expected the BoC trimmed its growth forecast for next year, but significantly the downward revision was less pronounced than had been anticipated. The GBP CAD exchange rate briefly dipped below the 1.5800 level following the development and is currently trading at 1.5814.

Elsewhere, the euro’s troubles continue as news emerged this afternoon that leading credit ratings agency Moody’s has downgraded the debt of five of Spain’s regions including, perhaps surprisingly, Catalonia. Moody’s cited a generalised lack of liquidity amongst the five regionalised governments as the reason for their action. Predictably, this has sent the GBP EUR exchange rate higher; towards the close of the European equities session, the pair was trading as high as 1.2308, considerably off yesterday’s 5-month low.

Tomorrow sees a packed data schedule, the highlight being the latest Federal Reserve FOMC policy decision. The US Dollar has performed strongly on the day today due to ongoing fears regarding a generalised global economic slowdown and a potential debt flare-up in the eurozone. This has taken the GBP USD exchange rate down to 1.5925 this afternoon, its lowest level since 7th September. If the FOMC’s policy statement tomorrow alludes to an extension to the Fed’s current $40bn pcm Quantitative Easing policy, then the Greenback’s gains could be rapidly reversed. Equally, any suggestion from Fed Chairman Ben Bernanke that a further loosening of US monetary policy is on the cards would be likely to have a similar effect. Investors holding US Dollar-denominated assets should remain wary.

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