The Pound Sterling to Euro (GBP/EUR) and Pound Sterling to Australian Dollar (GBP/AUD) exchange rates are both in for an interesting week ahead with the Bank of England (BoE), European Central Bank (ECB) and Reserve Bank of Australia (RBA) all announcing interest rate decisions.
On Monday the Pound Sterling to Euro (GBP/EUR) exchange rate was trending higher, while the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate sank after upbeat Australian and Chinese data emerged.
The Australian AiG Performance of Manufacturing Index rose from 48.0 to 52.3 in May, while the Chinese Manufacturing Purchasing Managers Index (PMI) climbed from 50.1 to 50.2.
The report read: ‘Manufacturing new orders expanded after five months of contraction while production also expanded after contracting for six months. However, manufacturing sales declined for a 12th month in May, signalling ongoing weakness in local demand.’
BoE Policymaker Divergence on Interest Rate Hikes Forecast, Pound Sterling (GBP) Exchange Rate to Fluctuate on BoE Inflation Predictions
The BoE isn’t expected to increase interest rates yet, but is certainly well on its way to seeing a policymaker divergence. In the past couple of Monetary Policy Committee (MPC) meetings, two of the nine members have noted that the decision on whether to hike interest rates or not was ‘finely balanced’.
The two MPC policymakers in question are likely to be Martin Weale and Ian McCafferty, who have voted in favour of higher borrowing costs several times in the past 12 months. The BoE interest rate decision will be announced on Thursday, followed by the BoE/GfK 12-Month Inflation Forecast on Friday.
RBA Interest Rate Cut could see Australian Dollar to Pound Sterling (AUD/GBP) and Euro (AUD/EUR) Exchange Rates Fall
Meanwhile, the Reserve Bank of Australia could cut interest rates after economic growth weakened and the Australian Dollar remained resiliently high. The RBA interest rate decision is scheduled for Tuesday and is likely to cause some major market movement.
UPDATE: The RBA kept rates on hold at 2.0% in June.
Additionally, Australia’s Gross Domestic Product stat on Wednesday is expected to ripple through the market significantly. Year-on-year, economists believe the figure could climb from 2.50% to 2.79%, which could give the ‘Aussie’ exchange rate a boost.
There are also some highly influential ecostats due out from China next week which will domino into Oceanic trading as Australia shares such strong trade links with China.
Euro to Pound Sterling (EUR/GBP), Australian Dollar (EUR/AUD) Exchange Rates Forecast for ECB, German Unemployment and Eurozone Inflation Movement
In the currency bloc, the European Central Bank’s interest rate decision on Wednesday could cause some fluctuations, although it’s unlikely there’ll be any adjustment to the current 0.05% benchmark. However, any comments regarding the ECB’s quantitative easing (QE) programme could have a major influence on the market.
By way of data, the Euro to Pound Sterling (EUR/GBP) and Euro to Australian Dollar (EUR/AUD) exchange rates could experience some additional fluctuations with several very important currency bloc numbers due out.
Monday will see the release of the German Consumer Price Index (CPI), while German Unemployment Rate and Unemployment Change stats are to be published on Tuesday. Eurozone Consumer Price Index figures will follow later in Tuesday’s session.
Eurozone Gross Domestic Product will be out on Friday and should spice up Euro exchange rate movement toward the end of the week. Additionally, the ongoing situation in Greece could cause extremely volatile movement in the Euro.
Other UK data out next week that may influence the Pound Sterling (GBP) exchange rate include Tuesday’s UK Net Consumer Credit, Net Lending Secured on Dwellings and UK Mortgage Approvals stats. Additionally, Markit’s Construction PMI will also be released later in Tuesday’s trading which is forecast to create moderate movement in the market.
UK Nationwide House Prices will be out on Wednesday, followed later in the session by Markit’s UK Services and Composite PMI.
Any changes in commodity prices such as iron ore are likely to influence the Australian Dollar in the week ahead as Australia’s largest export.
On Friday, the Pound Sterling to Euro (GBP/EUR) exchange rate was trading at 1.3865, while the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trending in the region of 1.9740.
