AUD, NZD, USD and EUR Fall as GBP Takes Centre Stage on Snap Election Announcement
21 April 2017 by News DeskIt’s been a bad week for the Australian dollar which is heading towards seven-month lows versus the British pound (AUD/GBP), after UK Prime Minister Theresa May called for a snap election, say exchange rate experts FC Exchange.
UK PM May’s Snap Election Announcement Causes Pound (GBP) Exchange Rate to Rocket
The pound has enjoyed being in the limelight this week with the latest election news allowing it to make significant gains against a host of other major currencies. Brexit negotiations were thought to be an ongoing downward pressure on sterling, but the news of a new election and predicted Conservative party landslide win has seen its popularity surge.
Analysts and investors believe that the election could create a stronger parliament and create a smoother process as the UK transitions from EU member to independent island.
Chief global political strategist at Citi, Tina Fordham, commented: ‘We expect that the PM’s gamble is likely to buy her more time as well as room for manoeuvre in the Brexit negotiations as she will depend less on fringe groups in her own party. That may reduce the risk of a negotiation failure and thus “chaotic Brexit”, but also of the UK remaining in the Single Market in the long-term or even reversing the decision to leave the EU.’
US Dollar Falls to Near Six-Month Lows Versus Sterling (USD/GBP)
It hasn’t been good news for the US dollar this week either as geo-political tensions rose significantly. The possibility of military action against North Korea has been at the forefront of investors’ minds as speculation on the situation heats up. Additionally, the US dollar has softened in recent weeks as confidence in Trump’s reforms has dwindled.
Federal Open Market Committee (FOMC) member Neel Kashkari is expected to speak later on Friday which could cause some USD market movement.
Australian and New Zealand Dollar Exchange Rates Remain Lower
The New Zealand dollar dropped to seven-and-a-half month lows against sterling (NZD/GBP) this week, reaching 54.53. Risk-sentiment impacted both the Australian and New Zealand dollars as investors headed towards assets such as gold and the Japanese yen.
However, the New Zealand economy received some good news this week in the form of inflation figures. The nation’s consumer price index (CPI) came in at 2.2% year-on-year in Q1, marking the first time inflation has sat at the midpoint of the Reserve Bank of New Zealand’s 1-3% target since 2011.
Meanwhile, the Aussie dollar became more unstable as the Reserve Bank of Australia (RBA) released its latest meeting minutes. The dovish minutes voiced concerns over the strength of both the labour and housing markets.
French Presidential Election Steals Spotlight Creating Euro Uncertainty
The euro could be in for a bumpy ride itself next week with the highly-anticipated French election taking place on Sunday. The event will be watched closely by investors as citizens head for the polls in case far-right controversial front runner Marine Le Pen takes the lead. Le Pen has stated she would offer an in/out EU referendum for France, which could lead the nation to say goodbye to the single currency. With recent terror attacks in Paris prominent in the news, some industry experts are suggesting that this could lend favour to Le Pen’s campaign.
Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.
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