While the only notable negative performances include narrow trending against the Indian Rupee (EUR/INR) and the Polish Zloty (EUR/PLN), the Euro has risen by 0.5% against the Canadian Dollar (EUR/CAD), 0.6% against the Japanese Yen (EUR/JPY) and 0.7% against the Australian Dollar (EUR/AUD). The poor results haven’t been hugely impactful, however, with trader focus dominated by the forthcoming Federal Open Market Committee (FOMC) interest rate decision.
Advertisement
The weakening of the yuan has a strengthening effect on the U.S. dollar, which reduces the competitiveness of USA products, and the increase in interest rates also has a strengthening effect on the dollar. Aiding the single currency gains was a report which showed Construction Output in the Euro-region saw robust growth. Falling food prices were the cause of the slower-than-expected growth, although rising clothes prices saw retail sales avoid a larger declination. Despite the weaker-than-anticipated retail sales growth, the figures show growth continues thanks to improving labour market conditions.
The U.S. dollar dropped against most major currencies on Wednesday as investors were awaiting the closely-watched Federal Reserve’s meeting statement due on Thursday. But ont he contrary, Lien said, the dollar could also rally for several days if the Fed raises the rate and indicates it could go ahead with a second increase in 2015 if economic growth accelerates.
The US Dollar to Pound Sterling exchange rate is now trending in the region of 0.6436.
The Euro to US Dollar (EUR/USD) exchange rate has risen considerably today ahead of a major day for the US Dollar and a crucial weekend for the Eurozone.
From a longer-term perspective, however, whether or not a Fed rate hike materializes this week, the broad-based market assumption is that an initial rate hike will most likely take place by the end of this year, or at least shortly thereafter. The Turkish Lira to Pound Sterling exchange rate was trending within the range of 0.2126 to 0.2149 during Thursday’s European session. The BoE is already under pressure to give a good indication of the timing of a rate hike given that wage growth recently accelerated at the fastest pace for 6-years, and with policymakers reassuring that low inflation is transitory.
The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.2% on Thursday afternoon.
Advertisement
One exception was the Turkish lira, which strengthened 0.8% against the greenback. With violence in Turkey threatening an all out civil war, the general election is only fuelling the fire. However, the voting pattern of the policymakers and their respective “dot plots” certainly did surprise investors, as did the tone of Fed Chair Janet Yellen’s press conference which followed. Next week’s British economic calendar is particularly sparse which could see Sterling volatility cool somewhat.
