[vc_row][vc_column][vc_column_text]The outlook of several major central banks turned more dovish last week, with the odds of the Bank of England (BoE) raising interest rates before the end of the year deteriorating.

Comments from European Central Bank (ECB) President Mario Draghi also saw the euro come under pressure, as the prospect of an interest rate cut was put back on the table.

The Federal Reserve, meanwhile, remains on track to cut rates in the near future after policymakers maintained a cautious view of the economic outlook at its June meeting.

However, the mood towards the New Zealand dollar improved on the back of a stronger-than-expected first quarter gross domestic product.

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Increased BoE caution dampens pound appeal

Investors were caught off guard by the dovish tone of the BoE’s June policy announcement, leaving the pound on the back foot.

Although the Monetary Policy Committee (MPC) left interest rates on hold, as widely expected, this was accompanied by a surprise downgrade to its second quarter growth forecast.

With the economy now expected to stagnate in the three months to June, rather than clock in growth of 0.2% as previously estimated, the mood towards the pound naturally soured.

Disappointing public sector net borrowing figures also put pressure on GBP exchange rates ahead of the weekend, highlighting the continued vulnerability of the UK economy.

A solid rebound in June’s CBI distributive trades index may encourage the pound to recover some of its lost ground, however.

Evidence of greater resilience within the domestic economy would improve the appeal of the pound, giving GBP exchange rates a lift in the face of escalating global tensions.

Even so, UK politics and a persistent sense of uncertainty over Brexit may limit the potential for positive momentum in the days ahead.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

Euro slumps as ECB puts possible interest rate cut on the table

As ECB President Mario Draghi indicated that the central bank could move to cut interest rates to a fresh record low EUR exchange rates slumped sharply.

Noting that unless Eurozone inflationary pressure shows signs of sustained growth in the months ahead the ECB will be forced to act, Draghi raised the prospect of another bout of monetary loosening.

The risk of interest rates falling further drove the single currency down across the board, with the latest signs still pointing towards lacklustre inflation across the currency union.

Even so, as June’s raft of Eurozone manufacturing and services PMIs generally bettered expectations on Friday this offered the euro a leg up.

EUR exchange rates look particularly vulnerable in the face of Thursday’s German consumer price index data, with the headline inflation rate expected to hold steady.

Unless inflation shows a sharp increase on both the month and the year this is unlikely to diminish the odds of imminent ECB policy action.

Any improvement in the German GfK consumer confidence index could encourage the single currency to trend higher in the short-term, however.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

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