FX Roundup: Euro, pound correct against the dollar

The euro and pound fell against the dollar on Thursday, with the greenback posting an uptick on import prices data and the Bank of England’s decision to keep interest rates on hold.

According to official data, US Import prices fell 0.4% in November from the prior month as fuel prices slumped 2.5%, following a 0.3% drop in October. Analysts had expected a 0.8% decrease. Prices have been on a downward trend throughout this year, slipping each month with the exception of May and June.

Elsewhere, the Bank of England voted 8-1 to keep interest rates unchanged. The UK central bank left interest rates at 0.5% and the asset purchase programme at £375bn, as expected by analysts, amid a slowdown in emerging economies, low inflation and a strong pound.

The minutes of the BoE’s policy meeting showed Ian McCafferty was once again the only policymaker to vote in favour of a rate hike. He preferred to see rates rise 25 basis points.

At 1549 GMT, the pound was up 0.65% against the euro fetching €1.3856. The dollar rose against the yen by 0.07% changing hands at JPY121.53. Concurrently, the pound fell 0.07% against the dollar exchanging at $1.5171, while the euro fell 0.75% to change hands at $1.0942.

Continuing with major crosses, the greenback rose 0.53% against the Swiss franc exchanging at CHF0.9884, slipping further below parity in the dollar’s favour during late European trading, after the Swiss National Bank left rates on hold earlier in the session.

Elsewhere, the dollar fell against selected commodity-linked currencies; down 0.44% against the Norwegian Krone changing hands at NOK8.6314 in Europe, alongside drops of 0.05% and 0.12% against the Canadian dollar and Mexican peso, changing hands at CAD$1.3573 and MXN17.0447 respectively.

Elsewhere, the Australian dollar rose against its US counterpart by 1.12% changing hands at US$0.7310. Concurrently, the New Zealand dollar also rose 0.63% changing hands at US$0.6762 as the Reserve Bank of New Zealand cut its Official Cash Rate (OCR) to 2.5%, down 25 basis points, and hinted it could be cut further.

The fourth cut this year was widely expected by analysts, and takes the OCR to levels last seen between 2011 and early 2014. Reserve Bank Governor Graeme Wheeler said growth in the New Zealand economy had softened over the year, mainly due to lower terms of trade.

“Combined with increases in the labour supply from strong net immigration, the slowdown has seen an increase in spare capacity and unemployment. A recovery in export prices, the recent lift in confidence, and increasing domestic demand from the rising population are expected to see growth strengthen over the coming year,” he added.

Kit Juckes, head of forex at Societe Generale, said, “The NZD rallied sharply after the rate cut. There's a pattern here! March Bill futures fell back a little as the market is reluctant to embrace the idea of further rate cuts in this cycle and NZD shorts are being cut back as year-end approaches.

"Maybe it's the market and not [ECB Prsident] Mario Draghi's communication deficiencies that were to blame for the EUR bounce. The market has been betting on rate cuts outside the US for such a long time that as we get to closer to the low in the rate cycle (everywhere), there are more reasons to take bets off than to add to them, and more scope for disappointment than excitement."