Fortunes of the Pound (GBP) Reversed Today in Spite of UK Strong Consumer Confidence
Early this morning the UK Consumer Confidence Survey for August posted well above forecast at 7 rather than 4, however, the fact that this data was collected prior to Black Monday has somewhat diminished the impact it has had on the outlook of Sterling (GBP). Relatively as-expected figures for the US yesterday afternoon, along with shortfalls on the Pending Home Sales and Continuing Claims numbers, were also of fairly limited support to the US Dollar (USD), leading the GBP/USD exchange rate to currently trend narrowly around 1.5428.
Meanwhile, the GBP/EUR pairing is ceding some of its recent gains after entering a downtrend overnight, presently at 1.3650.
The Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates experienced mixed fortunes as foreign data has the greater impact on Sterling-led pairings today in spite of a positive housing result, as the common currency (EUR) weakens and the ‘Greenback’ (USD) gains.
GBP/EUR Conversion Rate Climbing as ECB Dovishness Reduces Investor Appeal of the Euro
With stock markets having remained volatile in the aftermath of Black Monday the GBP/EUR exchange rate has seen some equally turbulent movement since the beginning of the week. A general exodus towards the greater security of the low-risk single currency (EUR) significantly weakened the pairing, although it was also quick to benefit as sentiment turned on Tuesday and a round of profit-taking ensued. In spite of a good performance on the German IFO surveys, with all three indicators clocking in better than expected, the Euro was pushed into losses across the board as risk aversion fell.
Yesterday also saw the common currency taking a further downturn against the majors, in spite of many global shares returning to the red, as European Central Bank (ECB) Executive Board Member Peter Praet gave a dovish view of the impact this current situation might have on the next ECB Rate Decision. Praet’s suggestion that loosening could now be on the table further discouraged pundits from throwing in with the Euro, pushing the GBP/EUR exchange rate up to 1.3703 after once again reclaiming some of its losses of the previous day.
The UK’s Nationwide Housing Prices for August contracted by less than anticipated this morning, to post at 3.2% year-on-year rather than 3.1% and prompted the Pound (GBP) to strengthen somewhat as the European markets opened to gains. However, with some significant data for both the UK and Eurozone due tomorrow, including the UK second quarter GDP and German Consumer Price Index, the pairing could well continue to experience fluctuations ahead of the weekend.
Currently the Pound Sterling to Euro (GBP/EUR) exchange rate is on an uptrend in the range of 1.3726, with the Euro to Pound Sterling (EUR/GBP) pairing moving lower to around 0.7285.
Impressive Result on US Durable Goods Pushed GBP/USD to Two-Week Low in spite of Fed Hike Hopes Disappointment
While the market turmoil, and in particular Monday’s record opening drop of 1,089 points on the Dow Jones, having seemingly all but eliminated the chance of a Fed interest rate rise in September, the ‘Greenback’ (USD) failed to benefit from its traditional safe-haven status. As speculation instead turned to the possibility of the Fed ultimately moving to loosen monetary policy in the next meeting the GBP/USD pairing was swiftly boosted to a monthly best of 1.5802.
A significantly better than expected showing on the US Durable Goods Orders for July saw the figure climb by 2% instead of contracting by -0.4% as traders had been anticipating. Fuelling a return to confidence for the US Dollar, coupled with a strong opening for the Dow, this prompted the GBP/USD exchange rate to plunge to a fortnightly low of 1.5454. Although word from New York Federal Reserve President Bill Dudley, previously one of the Fed members pushing for a hike, indicated that the argument for a rate rise was ‘less compelling’ in the wake of recent events this did little initially to dent the ‘Greenback’.
Later today the US GDP, Personal Consumption and unemployment data all stand to shore up the ‘Buck’ further if any can produce similarly positive results to encourage the market, in spite of the relatively limited effect these may have on the Fed’s policy stance. With Dudley’s dovish comments starting to truly sink in the GBP/USD pairing may still produce a rally, particularly if Sterling is supported by good figures with the upcoming UK GDP or Consumer Confidence Survey.
At time of writing the Pound Sterling to US Dollar (GBP/USD) exchange rate is trending narrowly at 1.5483, while the US Dollar to Pound Sterling (USD/GBP) pairing is also relatively sluggish in the range of 0.6458.