UK Inflation Fails to Meet Forecasts, Sterling (GBP) Weakens

Pound Sterling (GBP)

The Pound plummeted against the majors on Monday as investors reacted to the weekend’s political news.

Investors are concerned about UK Prime Minister Theresa May’s position following a report from The Sunday Times that 40 Conservative MPs were prepared to sign a letter of no confidence. A separate report that Foreign Secretary Boris Johnson and Environment Secretary Michael Gove were complaining about the lack of preparation for a potential ‘hard Brexit’ also undermined the Pound.

Tuesday’s UK inflation data inspired further Sterling losses by falling short of expectations.

US Dollar (USD)

GBP/USD losses were limited as the US Dollar came under pressure of its own as a result of tax concerns. The US Republican Senate drafted its own version of the tax bill last week, which disappointed investors due to indications that the implementation of corporate tax cuts could be delayed into 2019. As corporate tax cuts were one of the parts of US President Donald Trump’s fiscal agenda that excited markets most, uncertainty over the bill’s future is weighing on the US Dollar this week.

Euro (EUR)

The Pound to Euro exchange rate dropped on Monday and continued trending near its worst levels since the beginning of the year on Tuesday morning.

Demand for the Euro was bolstered this morning by the publication of some stronger-than-expected growth data from Germany. Germany’s Q3 Gross Domestic Product (GDP) projections beat 0.6% forecasts quarter-on-quarter and rose to 0.8%, while the yearly figure climbed from 2.3% to 2.8%. Italy’s Q3 growth stats beat expectations in both prints too.

Still, the Euro’s gains were limited as inflation stats from Germany and Spain merely met projections, while The Netherlands’ Q3 growth projection came in lower than expected QoQ.

Australian Dollar (AUD)

The Australian Dollar fluctuated after NAB’s Australian business confidence survey from October improved from 7 to 8, but with investors anticipating Wednesday’s Australian wage growth report, ‘Aussie’ strength was limited.

Mixed movement in iron ore, Australia’s most lucrative commodity, and cautiousness from Reserve Bank of Australia (RBA) officials are also keeping AUD exchange rates restrained.

New Zealand Dollar (NZD)

The Pound to New Zealand Dollar exchange rate was able to recover recent losses as worries relating to a potential adjustment of the Reserve Bank of New Zealand’s (RBNZ) mandate left the ‘Kiwi’ pressured.

Canadian Dollar (CAD)

The Pound to Canadian Dollar exchange rate briefly dropped yesterday morning but recovered towards the end of the day due to a lack of market appetite for risk-correlated currencies like the ‘Loonie’.

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