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Global Currency Market Indicators : Weekly Round-up

May 13, 2016 - Written by Frank Davies

UK News: A recent IMF report has been damning for the 'Out' campaign, which may have actually raised the appeal of the Pound due to its apparently conclusive nature.

EU Referendum Uncertainty Continues to Dictate Pound Sterling (GBP) Exchange Rate Movement

EU Referendum –

The POUND STERLING (currency : GBP) continues to struggle in the currency markets, in spite of this month’s slightly higher than anticipated UK Consumer Price Index reading.

The year-on-year print of 0.5% suggested that the domestic economy is moving away from deflation for once and for all, but the potential of a Brexit decision from the UK electorate next month provides an ongoing drag on the UK unit. The latest poll of polls, covering the period 26/04/16 until 08/05/16, printed at 50 / 50, suggesting that the result remains wholly in the balance.

Recovering Commodity Prices Positive for AUD, NZD and CAD Exchange Rates

Global Commodity Prices

The closely-monitored Bloomberg Commodity Index slipped to below the 81.00 threshold at the end of last week as fears regarding a renewed slowdown in the US jobs market increased.

However, this week’s session has brought a renaissance in the price of raw materials and the index has recovered to almost 85.00.

This spells good news for the Commodity Dollars – expect the AUSTRALIAN DOLLAR (currency : AUD), NEW ZEALAND DOLLAR (currency : NZD) and the CANADIAN DOLLAR (currency : CAD) to firm-up in the near-term as a consequence.

Delayed Federal Reserve Rate Hike Bets Forecast to Weigh on USD Exchange Rates

US Interest Rate Expectations

The US Federal Reserve increased its headline interest rate for the first time in almost a decade just before last Christmas.

At the time, analysts were anticipating another rate hike before Summer is out and these expectations sent the Pound Sterling US Dollar exchange rate down to within a whisker of its multi-year low in the mid-1.3000s. However, the intervening period has seen investors pare back their expectations for a near-term US rate hike and the Buck has suffered as a result.

Futures markets now price in a 40.6% likelihood that America’s headline interest rate will still be at its current level of 0.50% come the end of the year and whilst these expectations persist, support for the Dollar is forecast to remain soft. If the UK’s EU referendum next month goes the way of the ‘Remain’ campaign, then expect the GBP USD exchange rate to test the psychologically significant 1.5000 GBP USD level.

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