Fresh Pound Sterling (GBP) Volatility Predicted Ahead of Comments from BoE Policymakers
Confidence in the Pound (GBP) remains weak on Tuesday morning as ‘Brexit’ uncertainty continues to weigh on sentiment. However, with a number of Bank of England (BoE) policymakers, including Governor Mark Carney, due to give testimony to MPs today the ailing currency may yet find ground to rally on. At the start of the European session, though, the Pound Sterling to Euro (GBP/EUR) exchange rate was slumped at 1.2788, while the Pound Sterling to US Dollar (GBP/USD) pairing was trending lower at 1.4119.
Despite a deal having been agreed over reforms to the UK’s relationship with the EU, the Pound (GBP) has taken a hammering this morning after Boris Johnson pledged his support to the ‘Leave’ campaign.
Pound Sterling (GBP) Exchange Rate Slumps as Boris Johnson Backs ‘Leave’ Campaign
After Prime Minister David Cameron secured a deal to reform the UK’s position within the EU over the weekend Pound Sterling (GBP) has seen a fresh shift downwards. This is largely due to Mayor of London Boris Johnson announcing his support for the ‘Leave’ campaign, a move that many argue has increased the uncertainty of the June referendum’s outcome. As a result the Pound has slumped sharply across the board on Monday morning, clocking its largest single fall in eleven months as traders are deterred by the resurgence in ‘Brexit’ uncertainty.
The appeal of Sterling is unlikely to pick up substantially in the near-term, particularly as domestic economic data is limited in the earlier week. With little to distract investors from the debate surrounding the UK’s future the Pound is expected to continue trending lower against rivals.
Disappointing German Manufacturing PMI Weakens Euro (EUR) Today
It has been something of a mixed bag for the Euro (EUR) this morning with the latest raft of Eurozone PMIs proving generally disappointing. Although the German Services PMI showed an unexpected uptick from 55.0 to 55.1 this was contrasted by a much sharper drop in the Manufacturing PMI. Germany’s manufacturing sector slowed markedly from 52.3 to just 50.2 in February, only just remaining above the neutral baseline of 50 that separates sector expansion from contraction.
With the Eurozone’s economic powerhouse clearly under pressure from negative global headwinds, the outlook of the currency union appears more muted. As tensions continue to flare in Greece, with Prime Minister Alexis Tsipras due to meet with striking farmers today, confidence in the single currency remains volatile.
Forecast Smashing US CPI Shored up US Dollar (USD) Exchange Rate
Demand for the US Dollar (USD) has held its more bullish form after Friday’s stronger-than-expected US Consumer Price Index report. Inflationary pressure jumped from 0.7% to 1.4% on the year in January, a marked endorsement of the Federal Open Market Committee’s (FOMC) decision to raise interest rates at the end of 2015. This sign of strength within the world’s largest economy helped to shore up the ‘Greenback’ ahead of the weekend.
However, as CPI is not the primary inflation gauge by which the FOMC sets its monetary policy, investors remain uncertain of the chances of another Fed rate hike in the coming months. As policymakers have been taking a less hawkish tone in recent comments, in fact, the likelihood of the Fed opting to raise interest rates in the near future does not appear especially clear.
Current GBP, EUR, USD Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was slumped at 1.2774, while the Pound Sterling to US Dollar (GBP/USD) pairing was trending lower around 1.4162. Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate was on a downtrend in the region of 1.1086.