Today’s rate @ 08:00 1.1394
Keep an eye on the currency markets with up to date information on currency exchange rates. Here we provide a brief summary of the latest GBP/EUR exchange rate news and highlights.
Morning Report 15.12.2017
EU Summit, US Data in Focus
Alexandra Russell-Oliver, FX Analyst & Moneycorp Dealer Team
Yesterday’s Market Highlights
Despite a busy calendar day yesterday, market movement was relatively limited given the lack of central bank surprises. The ECB and BoE both kept policy on hold as was widely expected. The BoE kept expectations for a gradual pace of rate hikes, with the next hike not expected until late 2018. The ECB revised its 2018 inflation projections higher to 1.4%.
Earlier in the session, the pound received a small boost as Retail Sales jumped in November. The dollar later gained, particularly against the euro, as US Retail Sales also came in above forecast.
Sterling saw some gains around the 4pm fixing. This saw GBP/EUR drift towards 1.14 and GBP/USD pick back up towards 1.3440, where it held overnight. EUR/USD held below 1.18.
Today’s rate @ 08:00 1.1394
Today’s Market Highlights – Looking Ahead
The calendar is quieter today as the week draws to a close. MPC Member Haldane speaks at the International Rome Conference on Money, Banking, and Finance (13:15 GMT). Traders will keep an eye on any additional monetary policy guidance following yesterday’s policy meeting.
Headlines from the EU Summit will be key, particularly regarding the proposed deadline for agreeing a transition deal.
In the afternoon, attention will be on US Industrial Production and Capacity Utilization data (14:15 GMT). Mixed figures are expected, which may provide little clear direction for the dollar this afternoon. The future of the tax bill is also in focus with renewed doubts about its ability to pass after senator Rubio said he would not vote for it without changes to the child tax credit.
Speaking truth to power
Fed chair swansong
Janet Yellen made what could be her final public appearance as chairperson of the US Federal Reserve. She held a press conference to discuss the Fed’s almost universally-expected decision to increase the Funds rate. And she was rather less than laudatory about the likely impact of the Trump tax cuts.
The dollar had already weakened earlier in the day when the US data showed headline inflation rising to 2.2% while core inflation slowed to1.7%. The core measure, which ignores the more volatile food and energy prices, is said to be the one upon which the Fed focuses when deciding monetary policy.
By the time Mrs Yellen appeared investors were already aware that the Funds rate target had been raised to 1.25%-1.5%. They were not impressed because it was just what they had been expecting. Nor were they reassured by the chairperson’s sceptical view of the proposed “giant” tax cuts: they will increase the national debt without providing “a gigantic increase” in growth. The dollar ended up as the day’s biggest loser, conceding one cent to sterling and two thirds of a cent to the euro.
Taking back control
Parliament took back control of the Brexit process when it voted narrowly in favour of an amendment that will give it the final say in approving Downing Street’s deal with the EU. Investors eventually decided it was a positive outcome for sterling, which was an average of 0.2% higher on the day.
They were less concerned about the apparent defeat for the prime minister than they were relieved that it was more likely to result in closer future involvement with the single market. Investors have never been keen on the prospect of Britain “crashing out” of its relationship with Europe and they saw yesterday evening’s vote as diminishing that prospect.
Sterling was not Thursday’s winner though. The South African rand shared the lead with the Australian dollar, the rand on optimism that the ruling ANC party will pick a better leader to replace Jacob Zuma and the Aussie because of stronger-than-expected employment data. The Aussie strengthened by four fifths of a cent against the pound.
More central banks
Four central banks will reveal their latest monetary policy decisions today. The Swiss National Bank and Norges Bank are up this morning, followed by the Bank of England and the European Central Bank at midday. There will be retail sales figures from Britain and the States.
Investors are not expecting any of the three to alter their benchmark interest rates. The SNB is likely to keep its overnight deposit rate at -0.75% for a 36th month. Norges Bank’s key policy rate should remain at 0.5% for a 22nd month and the Old Lady is almost certain to keep Bank Rate at 0.5% for a second month.
The interesting one will be the ECB. No rate change is likely but investors will be eager to hear where the bank’s quantitative easing programme will be heading.
Weekly Market Updates: Week-ending 03-11-2017
The euro had an uneventful week. It was unchanged against the Japanese yen and a couple of dozen ticks higher against the US dollar and Swiss franc. The ecostats from Euroland were, by and large, positive for the currency: the handful of consumer and business confidence measures compiled by the EC came in above forecast and the first stab at third quarter growth showed the economy expanding by 0.6%.
Sterling’s week was anything but eventful. Until Wednesday it was toddling along quite nicely. At that point it was knocked slightly off balance by the resignation of UK defence minister. The following lunchtime it was smashed after the Bank of England delivered its widely expected interest rate increase. The bank made a big point of telling investors not to hold their breath for a further rate hike so they fled, leaving the pound four fifths of a euro cent lower on the week.