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Pound Euro (GBP/EUR) Above Opening Levels, US Dollar (GBP/USD) Exchange Rates Slump after Rosengren Remarks

Both the Pound Euro (GBP/EUR) and Pound US Dollar (GBP/USD) exchange rates weakened on Thursday as investors reacted to the European Central Bank’s (ECB) interest rate decision. With the ECB opting to take no action, the Euro broadly strengthened.

The Pound Euro currency pair dropped to 1.17, with the pairing now 3 cents lower than its recent highs. The Pound US Dollar exchange rate, meanwhile, hit a low of 1.3306.

US Dollar Advances as Fed’s Rosengren Comments Stoke Rate Hike Hopes

The US Dollar has entered a strong uptrend following remarks from Federal Reserve official Eric Rosengren that the US economy would be damaged or risk overheating if interest rates were left at their current lows for much longer. Bets of monetary tightening this year have leapt up; although the odds have jumped significantly, markets still think September is off the table, but odds on a December hike have gone from only just favouring a hike to strongly expecting one. Funds futures put the likelihood of policy tightening in September at 33%, which represents a doubling of the previous days’ odds.

(Previously updated 16.56, 09/09/2016)

Pound Boosted as Trade Figures Suggest Weakened Sterling Boosted Exports

Although the latest trade balance figures showed a smaller-than-expected narrowing of the UK’s trade shortfall, the Pound has nonetheless responded positively. Compared to a year earlier the trade in goods deficit had shrunk by -£1.2 billion to £11.8 billion, partly thanks to an £800 million increase in exports. The rise suggests that the weakened Pound has helped boost demand for UK goods; lower GBP exchange rates make UK exports more affordable for overseas businesses. However, the Office for National Statistics (ONS) warned that it was too soon to draw firm conclusions.

As a result, GBP EUR and GBP USD have found the strength to break into positive territory, although they still remain near opening levels.

(Previously updated 13.00, 09/09/2016)

Below-forecast UK manufacturing and house price data yesterday weakened the Pound Euro and Pound US Dollar exchange rates.

The Pound had previously been performing well, with both GBP/EUR and GBP/USD advancing to multi-week highs off the back of a trio of outperforming PMI’s from Markit. While economists believe the UK has bounced back from its initial slump following the nation’s decision to ‘Brexit’, the latest stats have indicated that the slump may have been more severe than anticipated.

Pound Euro Exchange Rate Weakens despite Recovering RICS House Prices

The Royal Institute of Chartered Surveyors (RICS) has posted an unexpected recovery, although the rebound had little effect on the Pound. The balance of surveyors who saw a rise in prices compared to those who saw a fall increased from 5% to 12%, rather than weakening to 2% as predicted.

Markets are still concerned with yesterday’s National Institute for Economic and Social Research (NIESR) GDP report, which suggested the UK could enter a technical recession as early as 2017.

GBP EUR exchange rates are currently down -0.1%, trending around 1.1856.

(Last updated 08.45, 08/09/2016)

Mixed UK Data for July Sours Pound Sentiment on Fears of Worsening Brexit Shock

New figures for July yesterday indicated a worse reaction to the Brexit vote than originally predicted.

Halifax house price data weakened below forecasts, declining -0.2% on the month and growing 6.9% on the year; ten basis points worse than anticipated in both cases.

Later, although industrial production figures did clock in marginally above forecasts, manufacturing production figures were significantly weaker.

As a result GBP EUR and GBP USD exchange rates had slumped around -0.5% by the end of the session yesterday.

Fears over German Economy Weigh on Euro after Poor Industrial Production Data

Yesterday’s industrial production figures did nothing to allay investor fears over the German economy after posting unexpected falls on the month and the year. Compared to June, production in July was -0.9% weaker, while compared to a year previous, output had declined -1.2%.

Holger Sandte, analyst with Nordea Bank, observed;

This is more proof that the manufacturing sector is no longer a driver of growth in a world that is increasingly dominated by services. The German economy maybe needs to adapt more to this.

The data softened the Euro, keeping it below opening levels verses the US Dollar. The Pound’s weakness kept the common currency on the uptrend.

US Dollar Strengthens as Rate Hike Bets Fluctuate between December and Early 2017

The odds of monetary tightening from the Federal Reserve in 2016 were seesawing yesterday. After tipping over into 2017, Fed Funds futures ended the session once again showing that investors narrowly expected the Fed would tighten policy in its final meeting of 2016, one year after it first raised interest rates.

Some of the confusion came from the fact that, despite the recent weakness in the headline ISM manufacturing and composite indices, Federal Reserve’s San Francisco President John Williams remained hawkish, claiming;

The economy has climbed back to full strength, and it therefore makes sense to move monetary policy gradually back to normal. In the context of a strong economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later.

The US Dollar advanced verses both the Euro and the Pound yesterday.

GBP, EUR, USD Exchange Rate Forecast; European Central Bank Decision could Weaken Euro

The RICS house balance could cause Pound movement today considering it is expected to show a net of just 2% of surveyors expect house prices to continue rising.

The European Central Bank (ECB) meets to discuss interest rates today. No changes to the rates are expected, although the Governing Council could tweak the quantitative easing programme.

The US Dollar may respond to initial and jobless claims figures.

GBP, EUR, USD Conversion Rates

The Pound to Euro (GBP EUR) exchange rate was trending in the region of 1.1867, while the Euro Pound (EUR GBP) exchange rate traded around 0.8420 during yesterday’s European session.

The Pound US Dollar (GBP USD) exchange rate was trending around 1.3342, while the US Dollar Pound (USD GBP) exchange rate traded around 0.7495.