- GBP exchange rates mixed after Bank of England hold rates
- EUR climbs on German growth data
- USD surges on Fed’s George
- EUR/USD exchange rate forecast to hold losses
US Dollar Climbs on Fed Speeches, Euro Edges Higher following Positive German Growth Data
Kansas City Fed President Esther George stated last night that interest rates were too low. This caused the US Dollar to rally having declined significantly previously in response to reduced bets regarding a cash rate hike. Meanwhile, the Euro also edged higher in response to German Gross Domestic Product data which outpaced economists’ forecasts in the first-quarter. Euro appreciation has been somewhat slowed, however, thanks to US Dollar strength.
Pound Sterling exchange rates are mixed on Friday morning ahead of construction output data. A general err towards negativity can be linked to the fact that the Bank of England (BoE) reduced growth forecasts for 2016 to 2.0% on EU referendum uncertainty.
Bank of England (BoE) Hold Rates, Pound Sterling Exchange Rates Improve
After the Bank of England opted to hold the official cash rate at the record-low 0.5%, the British Pound strengthened versus most of its major peers. Giving Sterling a healthy boost was the quarterly Inflation Report that showed policymakers believed there would be huge job losses in the event of a ‘Brexit’. This is thought to be persuasive for those on the fence to vote to remain in the European Union.
Pound Sterling (GBP) Exchange Rates Mixed ahead of Bank of England (BoE) ‘Super Thursday’ Publications
As traders await the Bank of England’s (BoE) ‘Super Thursday’ publications, in which the interest rate decision and accompanying meeting minutes are published at the same time as the quarterly inflation report, the UK Pound has seen a mixed performance versus its peers. Whilst policymakers are not expected to alter outlook at this time, any hint that looser policy was considered could weigh heavily on demand for the Pound.
A slight err towards overall GBP appreciation thus far today, however, can be linked to British housing data eclipsing expectations. April’s RICS House Price Balance was forecast to print at 35%, but the actual result reached 41%. This came even after data showed demand weakened thanks to uncertainty regarding the EU referendum.
‘Uncertainty is a word that features heavily in the feedback we are receiving,’ said RICS Chief Economist Simon Rubinsohn. ‘More ominous is the expectation that both prices and rents will head materially higher over medium term despite existing affordability concerns with the supply pipeline continuing to fall short.’
Euro (EUR) Exchange Rates Decline after Slower-than-Expected Eurozone Industrial Production Growth
Over the past several days the Euro outperformed its closest rivals thanks to the combination of speculation of long-term delays to a Federal Reserve rate hike and easing ‘Brexit’ concerns. However, today has seen the single currency halt its advance and cool, albeit fractionally, versus its major peers.
The slight Euro depreciation today can be linked to a string of less-than-ideal domestic data results. Perhaps most significant was Eurozone Industrial Production, which unexpectedly contracted in March on the month, and saw slower-than-anticipated growth on the year.
Also providing Euro headwinds was data out of France and Germany. April’s final figure for France’s annual Inflation Rate remained in contraction territory, and German Wholesale Prices contracted by -2.7% on the year in April.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.2618 to 1.2661 during the early stages of Thursday’s European session.
US Dollar (USD) Exchange Rates Steady ahead of Fed Speeches
Thanks to the combination of a lack of influential domestic data and mounting political uncertainty, the US Dollar has performed weakly versus most of its major peers over the past few days.
Concerns regarding controversial Presidential candidate Donald Trump’s mounting popularity has certainly had a detrimental impact on demand for the US Dollar. Even a return to risk-off trade, after Asian stocks volatility dampened market sentiment, wasn’t enough to provoke USD gains.
Later this afternoon there will be a number of speeches from Federal Reserve officials. Given that speculation of long-term delays to a Fed rate hike has been one of the drivers behind USD weakness in recent weeks, the speeches could provoke considerably volatility. If Fed officials continue to toe the party line and call for patience with regard to tighter policy, the US Dollar will likely dive.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.4404 to 1.4450 during Thursday’s European session.