Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold a Weak Position despite Dovish ECB Economic Bulletin
The Pound Sterling to Euro (GBP/EUR) exchange rate edged fractionally lower by around -0.2% on Thursday afternoon.
British data produced comparatively positive results today but the Pound Sterling is struggling against its major peers. The depreciation can be linked to ongoing concern that the slow pace of UK wage growth, combined with the low rate of inflation, will see the Bank of England (BoE) holding accommodative policy well into 2017. These concerns have been compounded by oil futures which show little sign of near-term improvement as the global glut continues to swell and demand for renewables increases with every passing year. What’s more, BoE policymakers recently dampened hopes that a Federal Reserve cash rate increase will pressure the British central bank into tightening policy by asserting that there is no ‘mechanical’ link between the two institutions.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3750.
The Euro, meanwhile, edged higher versus some of its major peers despite mostly disappointing economic data and a dovish European Central Bank (ECB) Economic Bulletin. The report highlighted downside risks from difficult global economic conditions and dampening demand for Eurozone exports. The single currency avoided a larger depreciation amid hopes that the Fed’s assertion that policy will be gradually tightened over a long period has given the ECB’s program of quantitative easing more time to have a positive impact.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Decline despite Mostly Weak US Data
The Pound Sterling to US Dollar (GBP/USD) exchange rate softened by around -0.3% on Thursday afternoon.
One positive for the UK today was November’s Retail Sales data which saw a 3.9% increase on the year and 1.7% growth on the month. In addition, the more volatile Retail Sales including Auto Fuel bettered estimates on both an annual and monthly basis. ‘Retailers will be pleased with the sales growth achieved in November, but analysts and retailers should really wait until the Christmas season has run its course before drawing any firm conclusions,’ said Ian Gilmartin, head of retail and wholesale at Barclays.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4927.
In the aftermath of the Federal Reserve interest rate hike the US Dollar edged higher versus its major peers. The appreciation has been fractional, however, given that traders had priced-in such a move and expected Chairwoman Janet Yellen to call for gradual tightening in the future. Today’s US data produced mostly disappointing results which has seen the US asset drop away from daily best rates, but the ‘Greenback’ (USD) is holding a position of strength. This is due to Yellen’s confidence in the US economic recovery, with the Fed chief stating that the decision marked ‘the end of an extraordinary seven-year period’ of close to zero interest rates. ‘The US economy has shown considerable strength,’ she added.
Pound Sterling Forecast: Consumer Confidence Data in Focus
The coming week’s economic data docket is somewhat sparse of significant British data. Tuesday’s GfK Consumer Confidence Survey is most likely to provoke Sterling volatility. Wednesday’s Third-quarter Gross Domestic Product data is unlikely to be hugely impactful given that it is the final estimate and not expected to deviate from expectations.
Similarly the UK, the Eurozone’s economic docket for the coming week will see few reports with the potential to provoke market movement. German Consumer Confidence for January will be the most watched of the European publications.
In contrast, Wednesday of next week will see two significant North American publications. Both Durable Goods Orders and Core Personal Consumption Expenditure have the potential to stimulate US Dollar volatility.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.3721 to 1.3817.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.4903 to 1.5009 during Thursday’s European session.