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// GBP

Friday 10th March 2017

Interest rate trends remained negative for the UK currency on Thursday as gilt yields were broadly stable.

Interest rate trends remained negative for the UK currency on Thursday as gilt yields were broadly stable while US benchmark yields moved higher and there was further upward pressure on German yields after the ECB meeting. Media reaction to the budget was generally lukewarm with concerns over the medium-term outlook which also had some negative impact on market sentiment, especially with a row over tax increases for self-employed workers. A further decline in energy and commodity prices also had some negative impact on the UK currency with Brent dipping below the $52.00 p/b level to the lowest level for three months before a slight recovery.

The UK currency was unable to break above the 1.2200 level against the dollar and the Euro moved above the 0.87 level for the first time in over seven weeks. Sterling remained on the defensive on Friday amid expectations that Bank of England would maintain a very loose policy over the medium term to underpin growth.

// EUR

Friday 10th March 2017

As expected, the ECB left interest rates on hold following the latest Governing Council meeting with the main refi rate held at 0.0%.

As expected, the ECB left interest rates on hold following the latest Governing Council meeting with the main refi rate held at 0.0%. There were no changes to the quantitative easing programme with monthly purchases of government bonds set to decline, as planned, to EUR60bn from April from EUR80bn at present.

There were upgrades to the 2017 growth and inflation forecasts, but with only marginal changes to 2018 and 2019 forecasts. President Draghi was more optimistic surrounding the outlook and the main message was that downside risks had eased significantly. In this context, there was a slight shift in forward guidance with the ECB no longer expecting to use all instruments at its disposal. This suggests that further rate cuts are now ruled out which was a tiny step towards policy normalisation with some market expectations of further moves in June and German bond yields moved higher.

The Euro edged higher after the comments, but hit selling interest above 1.0600 against the dollar. There were no major developments surrounding the French Presidential election with some nerves ahead of the Dutch vote next week.

// USD

Friday 10th March 2017

US jobless claims rose to 242,000 in the latest week from 223,000 previously, but still indicated a very strong labour market.

US jobless claims rose to 242,000 in the latest week from 223,000 previously, but still indicated a very strong labour market. Markets continued to anticipate that a robust US employment report on Friday would seal the case for a Fed rate hike next week and these expectations again provided solid underlying dollar support. There will be a sharp market reaction if the employment report is much weaker than expected as the Euro consolidated near 1.0600 on Friday.

// Rates

Friday 10th March 2017

Morning Market Rates: (Please note: These are indication prices only, they are not offer rates)

GBP/USD: 1.2167

GBP/EUR: 1.1463

GBP/AUD: 1.6174

GBP/CHF: 1.2314

GBP/ZAR: 16.1293

GBP/JPY: 140.4090

USD/ZAR: 13.2610

EUR/USD: 1.0613

EUR/ZAR: 14.0768

GBP/NZD: 1.7601

GBP/CAD: 1.6417

GBP/AED: 4.4679

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