Economists Predict: No Interest Rate Hikes
The Pound has climbed to a two-year high against the US Dollar ahead of the release of the Bank of England’s monetary policy announcement. Economists are predicting that the Bank will maintain its bond-buying target and keep interest rates at a record low. Against the Euro, Sterling is expected to come close to its highest level in a year if the today’s balance of trade data shows that the UK’s deficit narrowed in November.
The US Dollar fell against the Pound and Euro but pushed higher against commodity and emerging market currencies after the Federal Reserve said that a stronger labour market was the main cause behind its decision to cut its asset purchase program by $10 billion, reducing it to $75 billion-a-month.
The Euro recovered from a five-week low against the US Dollar due to speculation that the European Central Bank will choose to refrain from increasing stimulus measures when policy makers gather for their monthly meeting. The currency could make further gains if today’s economic, consumer and business confidence reports show improvement. One drag on the currency could be the latest unemployment rate figure for Greece which is expected to rise to another new high.
The ‘Aussie’ weakened for another day against the Pound and US Dollar as speculation rises that the US Federal Reserve will continue tapering its stimulus programme. Investors are looking ahead to Friday’s US payrolls data for guidance. The currency was also weighed down by the release of data in China which showed that the nation’s inflation rate came in below forecasts.
New Zealand Dollar
The New Zealand Dollar fell after better than expected US jobs figures and minutes to the last Federal Reserve policy meeting stoked optimism over the recovery in the world’s biggest economy, fuelling expectations that the US Central Bank may withdraw stimulus faster than anticipated.
The Canadian Dollar is expected to weaken to its lowest level since 2009 and maintain its run of declines for some time to come according to the Canadian Central Bank. The currency remains under pressure from Tuesday’s data which showed that the nation’s trade balance deficit was nine times greater than economists had been expecting.
South African Rand
The South African Rand recovered some ground overnight but could slip back to a five-year low against the US Dollar if today’s manufacturing data comes in below expectations. The Rand is not expected to make much of a recovery as the US continues to post positive data which increases the likelihood of the Federal Reserve tapering its easing programme at a faster pace. A move that would have a negative impact on emerging and commodity based currencies such as the Rand.
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