A poor week for both Pound to Euro (GBP EUR) and Pound to US Dollar (GBP USD) exchange rates is set to close with Sterling posting additional losses, given that today’s UK Construction Output report has come in negatively, almost matching with forecasts.
As of writing, GBP EUR was close to a tipping point at 1.1615 while the GBP USD exchange rate had declined to 1.2950.
- Sterling’s value repeatedly harmed by week’s UK news – Latest damage was construction output score
- Euro bolstered after GBP news – Germany more-than-doubles annual Q2 GDP flash
- US Dollar unbalanced by investor uncertainty – Recent Fed comments favour September rate hike
- Pessimistically-predicted US sales data incoming – Similar drop expected for University of Michigan confidence score
The Euro has risen notably thanks to a prediction-busting German GDP flash, while the US Dollar has been unsettled on contrasting claims stats and incoming sales and confidence results.
The UK’s Construction Output report showed a -0.9% slide in monthly output and a -2.2% drop on the year in June. Given that the vote to Brexit from the European Union took place at the end of that month, July’s figures are likely to be worse.
The upcoming US retail sales and consumer confidence results could have a notable impact on both Pound US Dollar and Euro US Dollar exchange rates.
(Last updated August 12th, 2016)
UK Economic News: Pound Sterling Flopped after Proof of Slowing House Price Growth Emerged
The Pound’s most recent movements have been exceptionally poor, with losses of -0.2% against the Euro (GBP EUR) and -0.4% against the US Dollar (EUR USD) representing the low range of other more significant declines for GBP, such as -1% against the Russian Ruble (GBP RUB).
At the end of an appalling week for UK economic and domestic news, the Royal Institute of Chartered Surveyors (RICS) house price balance for July has recorded a drop from 15% to 5%.
For context, this means that a net of just 5% of those surveyed saw house prices rise over the month, which is being cited as evidence of how damaging the EU Referendum result has been for the UK.
Additionally, a survey of economists by Reuters predicted a -0.1% recession in the final two quarters of 2016. In a last minute comment that only cemented Sterling’s poor status, Pantheon Macroeconomics economist Samuel Tombs said;
‘[A UK] recession will largely be driven by sharp falls in business investment over the coming quarters. Most firms will hold off investment until there is a bit more clarity over whether we are likely to remain in the single market … and to see how much other firms are impacted by “Brexit”’.
Euro (EUR) Rates Unsettled by Inflation Data while US Dollar Climbs on Correctional Trading
The Euro has been unsettled against its peers of late, with losses such as -0.3% against the Swiss Franc (EUR CHF) and -0.4% against the Canadian Dollar (EUR CAD) coming alongside gains of 0.3% against the New Zealand Dollar (EUR NZD) and the Pound (EUR GBP).
Recent news out of the Eurozone has focused on Italian and French contributions; both nations have posted dramatically worse finalised annual inflation rates for July, while Italy’s trade balance for June has also shown a surplus worsening from 5.03bn to 4.66bn.
From the US, the ‘Buck’ has recorded rises of 0.4% against the Pound (USD GBP) and New Zealand Dollar (USD NZD) alongside losses of -0.3% against the Canadian Dollar (USD CAD) and -0.5% against the Norwegian Krone (USD NOK).
The latest news from the US has focused on import and export prices, as well as claims made in late July and early August.
For trading prices in July, both import and export costs have come out negative on the year, while continuing jobless claims for July have risen and initial jobless claims for August have fallen slightly.
One major source of support for the US Dollar has been the recent slip in the New Zealand Dollar’s value, which has come from excessive profit taking. With the risk-associated commodity falling into negative ranges, investors have flocked back to the comparatively safer US Dollar.
Future GBP EUR USD Forecast: Will the Pound Slide Once Again on Imminent Construction Stats?
The next major piece of UK domestic data is expected shortly, when the UK’s annual June construction output result is announced.
Forecasts have been gloomy, with a worsening from -1.9% to -2.3% on the cards, therefore Sterling could well deteriorate against the Euro and US Dollar once again before trading closes.
A range of Eurozone ecostats are due, with German and Italian GDP growth rates for Q2 being announced alongside the overall Eurozone figure. On the year, forecasts have been for rising German and Italian outcomes but a slight dip for the Eurozone.
The US will have on offer the July retail sales stats, as well as the University of Michigan confidence index for August. Out during the afternoon, retail sales are expected to fall from 0.6% to 0.2%, while the confidence score has been estimated to drop from 90 to 89.2.