FX round-up: Sterling lower on hawkish BOE tones, greenback firms up for second day

Digital Look WebFG News | 17 Oct, 2017 18:01 - Updated: 18:01 | | |


Data out on Tuesday for the the UK showed year-on-year inflation hit a five year high of 3%.

Speaking at the Treasury Select Committee, Bank of England (BoE) Governor Mark Carney said, "We expect that inflation will peak in and around the October figure, October-November figures, peaking potentially above the 3 percent level." Adding, "In my view, bank rate (not QE) will be the relevent instrument for some time to come."

Regarding the latest interest rate meeting, Deputy Governor Davis Ramsden said, "I voted to maintain bank rate at a quarter percent. A majority of MPC members saw a case for removing some monetary stimulus in the coming months, I wasn't in that majority."

Hawkish tones were picked up by the market from both representatives and was enough to send sterling 0.5% lower against the dollar to 1.3177 by 1700 BST.

The greenback was firmeer on the day following a report that U.S. President Donald Trump was leaning towards picking Stanford economist John Taylor as the next head of the Federal Reserve.

Taylor, an advocate of a rules-based approach to monetary policy, is seen as more hawkish than current Chair Janet Yellen and would therefore make a faster pace of tightening likely, boosting the dollar.

Lee Hardman at MUFG in London said, "A potential shift in strategy towards a more rules-based approach for setting policy would be seen as less supportive for financial markets and increase the likelihood of the Fed raising rates materially more in the coming years than is currently priced in,"

The dollar index – which measures the greenback against a basket of six major peers – rose on the report, and on Tuesday climbed 0.35% to 93.606 , its strongest since Oct. 9.

The euro continued to slide against it's US counterpart, down 0.36% on the day to 1.1750, knocked lower by a stronger dollar.

On the data front, Germany release the latest ZEW economic sentiment figure which came in at 17.6, missing expectations of 20.1.

"The EUR/USD is going to be rather stable for the time being, as investors weigh ongoing hawkish rhetoric from the Fed against an improving euro zone economy," said Fawad Razaqzada at Forex.com.

"However, the euro may be heading lower from here as the dollar remains fundamentally supported, with the Fed being the most hawkish central bank out there," he said.

Against the pound, the euro faired a little better, managing to notch up a 0.14% move higher to 0.8914.

Dollar strength helped the greenback gain some ground against the Japanese yen, with the pair up 0.11% to 112.31 after rising 0.3 percent late on Monday, when it pulled away from a three-week low of 111.650.

More news

17 Nov Europe close: Stocks slip going into the weekend

Stocks reversed early gains as investors opted to play it safe going into the weekend and the euro edged a tad higher on the back of the political gyrations on Capitol Hill.

17 Nov Europe open: Stocks start slightly higher, analysts wary

Stocks have started the morning trading slightly higher, tracking overnight gains on Wall Street but analysts are worried about buying into Thursday's bounce.

17 Nov London close: Stocks finish week on down note

London's top flight index slipped on Friday, but managed to finish well-off its lows of the session despite renewed Brexit angst as the pound gave back early gains.

17 Nov Kingfisher gets RBC upgrade as 'reasons to be cheerful' in France

DIY retailer Kingfisher has more "reasons to be cheerful" thanks to an improving French outlook, analysts at RBC Capital Markets said on Friday, while clothes seller Supergroup remains "compelling" but its shares have gained a lot in recent weeks.

17 Nov NAV on the rise as Alpha Real Estate Trust turns focus to build-to-rent market

Real estate investment group Alpha Real Trust saw its net asset value (NAV) rise in its first half of trading as it moved to make further investments in build-to-rent projects.

17 Nov Pacific Industrial & Logistics completes sale of Bedford asset

Industrial and logistics-focussed real estate investment trust Pacific Industrial & Logistics has completed the sale of an asset located at Hammond Road, Bedford, for a total consideration of £5.8m, it announced on Friday.

17 Nov DP Poland cuts ribbon on 50th Polish Domino's store

DP Poland, which holds the exclusive master franchise for the Domino’s Pizza brand in Poland, celebrated the opening of its 50th location in the country on Friday.

17 Nov Mercia Technologies makes new investment into Aston EyeTech

National investment group Mercia Technologies has made a new direct investment into Aston EyeTech - a spinout from Aston University, Birmingham - which has developed a range of proprietary hardware and software products in ocular care, it announced on Friday.

17 Nov SimiGon receives final approval for $2m Israeli Air Force order

Modelling, simulation and training solutions provider SimiGon has now received final regulatory approval for a $2m purchase order received from the Israeli Air Force, initially announced on 20 June 2016, it confirmed on Friday.

17 Nov Agriterra losses grow after 'subdued' interest in corn products

Agricultural investment group Agriterra saw losses widen in the first half of its trading year as subdued demand for its maize flour products slashed revenues by more than a third.