UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate edged higher by around 0.2%, whilst the Pound Sterling to US Dollar (GBP/USD) exchange rate is trending within a limited range on Wednesday morning.
Despite the fact that Bank of England (BoE) Governor Mark Carney reassured traders that the British economic recovery is not debt-fuelled, the Pound continues to hold a weak position; trending close to a 11-month low against the Euro. The lack of demand for the British asset can be linked to concerns that the Bank of England (BoE) will look to delay a benchmark rate hike for a considerable time against the backdrop of weak wage growth and low inflation.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3338.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4437.
Yesterday…
Pound Sterling to Euro (GBP/EUR) Conversion Rate Predicted to Dive after Lower-than-Anticipated British Retail Sales Growth
The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.6% on Tuesday afternoon.
British economic data produced poor results on Tuesday, causing the Pound to soften versus the majority of its most traded currency peers. The depreciation was initiated by December’s Like-for-Like Sales which showed growth of 0.1%, below the market consensus of 0.5% but still much improved upon the previous figure of -0.4%. Aiding the depreciation was November’s Industrial Production and Manufacturing Production which failed to meet with the respective median market forecasts on both a monthly and annual basis.
BRC chief executive Helen Dickinson said: ‘2015 drew to a disappointing close for retailers… notwithstanding the strong underlying momentum of an improving consumer environment buoyed by rising real incomes, low inflation and low unemployment. Online performed strongly as consumers embraced the convenience and flexibility that more sophisticated retailers offered. Nevertheless, the boost from online was not enough to make this a Christmas to remember for most retailers.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3310.
Meanwhile, the Euro advanced versus a number of its currency competitors thanks to carry trades as investors took advantage of the European Central Bank’s (ECB) extremely accommodative policy outlook. With an absence of domestic data to provoke changes today the single currency will likely see movement in response to US Dollar positioning and market sentiment. A speech from ECB official Peter Praet has the potential to stimulate Euro changes, although demand for carry trades may overshadow Praet’s comments.
Pound Sterling to US Dollar (GBP/USD) Conversion Rate Forecast to Decline ahead of Fed Speeches
The Pound Sterling to US Dollar (GBP/USD) exchange rate dived by around -0.8% on Tuesday afternoon.
Commenting on the less-than-ideal British Industrial/Manufacturing data, Samuel Tombs at Pantheon Economics stated: ‘November’s sharp fall in production sets up the industrial sector to drag on GDP growth in Q4 for the first time in three years, providing another indication that the overall economic recovery is losing momentum… The 0.4% fall in manufacturing output probably signals the emergence of a weaker trend, given the pronounced weakness of the latest surveys and the continued strength of the Pound.
‘Even if we optimistically assume that industrial production held steady in December, it will be 0.1% lower quarter-on-quarter in Q4, the first quarterly drop since Q4 2012. Industry accounts for only 15% of GDP, but with services output increasing by just 0.1% month-to-month in October and the construction recovery stalling, it’s now likely that the economic recovery slowed even further in the fourth quarter.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4430.
Although Federal Reserve official Robert Kaplan stated that four interest rate hikes in 2016 are ‘not baked in the cake’ the US Dollar advanced versus most of its currency rivals. Highlighting concerns regarding the economic slowdown in China, Kaplan stated; ‘We have to pay attention to underlying economic conditions and we certainly have to watch what’s going on with financial conditions. You got to give it some time to see how things unfold.’
The US Dollar appreciation can be linked to demand for safe-haven assets as global stock volatility continues to amplify trader uncertainties. Speeches from Fed official Stanley Fischer and Jeffrey Lacker have the potential to provoke ‘Greenback’ (USD) volatility later today. In addition, November’s JOLTS Job Openings will be of interest to those trading with the North American asset.
Pound Sterling Forecast: Carney Speech to Provoke Volatility
The Pound Sterling to Euro (GBP/EUR) and US Dollar (GBP/USD) exchange rates will likely see volatility on Tuesday afternoon in response to a speech from Bank of England (BoE) Governor Mark Carney. The British NIESR Gross Domestic Product Estimate for December is also likely to provoke changes for the GBP/EUR and GBP/USD exchange rates.
However, given the extent of the depreciation and with sentiment rocky as European stocks fall in response to weak oil prices, the Pound is likely to hold losses versus the Euro and US Dollar unless the Carney Speech and GDP Estimate produce surprising outcomes.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.3264 to 1.3418.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.4412 to 1.4560 during Tuesday’s European session.
