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GBP/AUD, GBP/NZD Exchange Rates Mixed after Fed Predicts Three 2017 Rate Hikes

December 15, 2016 - Written by Tim Boyer

The Pound spiked against the Australian Dollar and New Zealand Dollar on Friday afternoon as investors continued to readjust their positions on the risky antipodean currencies following the Fed’s surprisingly hawkish outlook this week.

Commodity prices remained decent and US data from the day was largely disappointing. However, as traders began to perceive a smaller spread in the future due to higher US interest rates, AUD and NZD appeal plummeted.

[Previously Updated 1:00pm 16/12/2016]

The disappointment of the Bank of England’s (BoE) more dovish outlook on monetary policy wore off somewhat on Friday, allowing GBP exchange rates to trend higher.

Both the Australian Dollar and the New Zealand Dollar remained on a weaker footing thanks to the more hawkish tone of the Federal Reserve, with the appeal of commodity-correlated currencies generally limited at this juncture.

[Previously updated 15/12/2016]

Pound Sterling has been mixed today following the latest Federal Reserve rate hike, with GBP/AUD surprisingly weak, although GBP/NZD has advanced on the prospect of three US rate hikes next year.

Pound Softens vs AUD, Advances vs NZD after BoE Inflation Outlook

The Bank of England (BoE) has disappointed investors today after dashing hopes that recent strong inflation data would motivate policymakers to raise interest rates earlier than expected.

According to the Monetary Policy Committee (MPC);

‘Since the Committee’s previous meeting, sterling’s trade-weighted exchange rate has appreciated by over 6%, while dollar oil prices have risen by 14%.

All else equal, this would result in a slightly lower path for inflation than envisaged in the November inflation report, though it is still likely to overshoot the target later in 2017 and through 2018.’

This has undermined hopes that the Bank would return its focus to inflation, given that the post-Brexit vote PMIs have shown greater economic resilience than was expected.

Strong Labour Data Gives Australian Dollar to Pound Sterling a Boost

The Australian Dollar has been able to defy the downwards pressure coming from a strong US Dollar thanks to some positive domestic data.

The latest labour market figures show that over 39,000 people entered full time work in November; more than double the number of people expected to enter jobs of any kind. In fact, the number of part time workers edged lower as some transitioned to full time work.

October’s figures were also positively revised, taking the month’s job creation up to 15,200, full time employment change up to 45,700 and the part time employment change figure to -30,500.

New Zealand Dollar Weakened by Poor Data and Fed Hike

The latest Federal Reserve interest rate hike isn’t the only thing keeping the New Zealand Dollar on the decline today.

Data released late on Wednesday night has also contributed to the NZD losses.

The Business NZ performance of manufacturing index for November fell on the month, slipping to 54.4 to 55.2, while the value of all buildings figure clocked in at 1.4%, instead of 2.1% as forecast.

GBP/AUD, GBP/NZD Exchange Rate Forecast; Quiet Data Day could See Sentiment in Control

There is little impactful on the data calendar tomorrow, which could see GBP/AUD trending limply and GBP/NZD falling on correctional trending.

While there is no Australian data set for release, New Zealand consumer confidence data for December will be released at midnight.

UK data consists of the CBI trends total orders and selling prices reports.

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