The Australian, New Zealand and Canadian dollars have all gained sharply this week as both the UK and US central banks turn more dovish on interest rate hike expectations. Sterling is trading near three-month lows against a currency basket and four-month lows against the euro after finding little buying interest following the Bank of England decision. In the past eight trading days, the Canadian dollar has appreciated by 3.7 and 2.3 per cent against the US dollar and the pound respectively. Having touched six-year highs in August, GBP/AUD has lost nearly 3.5 per cent this month.

US dollar

The US dollar fell to its weakest in three weeks against a basket of currencies and to a two-week low against the euro. Minutes from the Federal Reserve’s September 17 meeting were released with US policymakers repeating concerns about emerging market threats and the risks to the US economy from a strengthening US dollar.

Sterling

The pound traded at two-week highs against the US dollar, up nearly 1.5 per cent this week. This move higher for Sterling comes as a surprise after a more dovish Bank of England announcement on Thursday. The Bank of England made no change to its 0.5 per cent bank rate and the MPC voted 8-1 to keep rates unchanged as expected. The BOE now sees a weaker inflation outlook, suggesting rates may not rise anytime soon. However, BOE governor Mark Carney was speaking separately and remains more confident about the UK economic outlook.

EUR

The euro continues to trade at its strongest in nearly four months against the pound after a slightly dovish Bank of England announcement. Despite dire news from the German economy this week, the euro’s resilience remains a key talking point in currency markets. One view is that as the US continues to delay raising rates, the euro’s ability to strengthen could continue unless the European Central Bank takes new measures to weaken the euro such as extending quantitative easing. Over the past 30 days, the EUR/USD rate has risen by 1.6 per cent.