The British Pound to Euro (GBP/EUR) and British Pound to Canadian Dollar (GBP/CAD) exchange rates were trending higher on Wednesday whereas the British Pound to Australian Dollar (GBP/AUD), British Pound to US Dollar (GBP/USD) and British Pound to New Zealand Dollar (GBP/NZD) exchange rates remained in a tight range.
Markit’s UK Services and Composite Purchasing Managers Indexes (PMI) will be out later in the session.
The British Pound to Euro (GBP/EUR) and British Pound to US Dollar (GBP/USD) exchange rates were trending in a narrow range on Tuesday while the British Pound to Canadian Dollar (GBP/CAD), British Pound to Australian Dollar (GBP/AUD) and British Pound to New Zealand Dollar (GBP/NZD) exchange rates all fell.
The ‘Aussie’ and the ‘Kiwi’ were offered some support when the Reserve Bank of Australia (RBA) didn’t cut interest rates as many economists had forecast.
Earlier… The British Pound to The British Pound to Euro (GBP/EUR), British Pound to US Dollar (GBP/USD) and British Pound to Canadian Dollar (GBP/CAD) exchange rates were all trending lower in the first half of Monday’s European session while the British Pound to Australian Dollar (GBP/AUD) and British Pound to New Zealand Dollar (GBP/NZD) exchange rates gained.
The British Pound was offered little support from a favourable jump in Markit’s UK Manufacturing Purchasing Managers Index (PMI). The index rose from 53.1 to 54.1 in February—a seven-month high.
Markit stated: ‘The growth rate of the UK manufacturing sector continued to strengthen at the start of 2015, leading to further job creation. Companies benefited from solid inflows of new business from the domestic market, which offset lower new export order volumes. Price pressures remained on the downside, however, with both average input costs and selling prices falling during the latest survey month.’
UK House Growth Slows to 17-Month Low – British Pound (GBP) Softer
Conversely, UK house growth eased in February to its most lethargic pace in 17-months amid a ‘subdued’ property market. The Nationwide House Price Index fell to only 5.7% on the year in February from January’s 6.8% and forecast 6.2%. The monthly figure showed a -0.1% contraction.
However, UK Mortgage Approvals also fell below forecasts but still remained steady in January at 60.8K.
Nationwide economist Robert Gardner commented: ‘The broader economic backdrop has remained supportive of housing market activity. Mortgage rates remain close to all-time lows and consumer confidence remains buoyant. Nevertheless, the pace of housing market activity remains fairly subdued.’
Meanwhile, the Euro to British Pound (EUR/GBP) exchange rate was bolstered by favourable Eurozone inflation data. The Eurozone Consumer Price Index (CPI) contracted by only -0.3% from -0.6% in February on the year instead of the -0.5% forecast.
In addition, the Eurozone Unemployment Rate softened to 11.2% from a positively revised 11.3%—a 33-month low.
Eurozone unemployment rate starts to crumble down. 11.2% in Jan. At this pace, it will only take another 2 yrs before leaving double-digits.
— Carsten Brzeski (@carstenbrzeski) March 2, 2015
Meanwhile, the US Dollar could be in for some major exchange rate movement on Monday with the highly influential US Personal Consumption Expenditure and ISM Manufacturing figures out in the second half of Monday’s European trading.
The US Dollar enjoyed an upswing in investor sentiment early on Monday when the People’s Bank of China (PBOC) enacted another rate cut—the second in three months—pressuring currencies such as the Australian and New Zealand Dollars lower.
Both Trans Tasman currencies share strong trade links with China and therefore any developments in the nation can have a direct impact on the ‘Aussie’ and the ‘Kiwi’.
However, the move sparked additional fears that the Reserve Bank of Australia (RBA) will be more likely to cut interest rates in the next monetary policy meeting on Tuesday.
The Australian Dollar exchange rate had already been trending lower in anticipation of the meeting, but with a potential slowdown taking place in China, investors are suggesting the RBA will need to issue the rate cut to encourage growth.
Commonwealth Bank of Australia currency strategist Joseph Capurso commented: ‘We think they will cut. But even if they don’t cut on Tuesday, we think they’ll cut again in the next few months.’
‘I think part of it is commodity prices, which are still pretty soft. The going-ons in Europe are still not resolved; China’s economy is still softening; and Australian economic data here is OK but still not good. The capital expenditure data we got last week was pretty hopeless and that’s what’s got people thinking they’ll have to cut again, if not on Tuesday then soon enough.’
The New Zealand Dollar initially gained on the news of China’s interest rate cut as it spurred expectations that Kiwi commodities would see an increase in demand.
This week could see major movement from the closely linked Trans Tasman currencies with data such as Australian Gross Domestic Product (GDP) stats on Wednesday and the Australian Performance of Construction Index on Thursday.
The Canadian Dollar remained relatively buoyant on Monday, gaining against the Pound (CAD/GBP), New Zealand Dollar (CAD/NZD), Australian Dollar (CAD/AUD) and US Dollar (CAD/USD) while falling against the Euro (CAD/EUR).
However, Canada’s RBC Manufacturing PMI is still to be released later in the session and could cause some additional ‘Loonie’ movement. Tuesday will really see the Canadian Dollar stretch its legs when Gross Domestic Product stats emerge. Year-on-year, forecasts expect to see December’s GDP rise to 2.5% from 1.9% and if correct could allow the ‘Loonie’ to jump.
British Pound Exchange Rate Forecast: GBP/EUR, GBP/USD, GBP/CAD, GBP/AUD, GBP/NZD
The British Pound has several influential events ahead of it this week, such as the Bank of England (BoE) interest rate decision. Markit’s UK Construction PMI will be out on Tuesday.
The British Pound to US Dollar (GBP/USD) exchange rate is trading at 1.5362. The British Pound to Canadian Dollar (GBP/CAD) exchange rate is residing at 1.9224. The British Pound to Australian Dollar (GBP/AUD) exchange rate is hovering at 1.9655. The British Pound to New Zealand Dollar (GBP/NZD) exchange rate is trading at 2.0377. The British Pound to Euro (GBP/EUR) exchange rate is trending in the region of 1.3765.