Pound Sterling (GBP) Exchange Rate Shored up by BoE Commentary
While the Pound Sterling to Euro (GBP/EUR) exchange rate remains on an uptrend in the region of 1.2809 this morning the Pound Sterling to US Dollar (GBP/USD) paring is trending lower at 1.4444. Despite the Bank of England (BoE) remaining on hold at yesterday’s policy meeting confidence in the Pound (GBP) was shored up as policymakers retained a certain amount of optimism in the underlying fundamentals of the UK economy.
Investors are tending not to favour the Pound (GBP) today as markets expect the Bank of England (BoE) to continue taking a dovish view of monetary policy this afternoon.
Pound Sterling (GBP) Trends Lower as Markets Brace for BoE Dovishness
The appeal of Pound Sterling (GBP) remains muted on Thursday morning in the wake of Chancellor of the Exchequer George Osborne’s latest Budget. Economists have reacted with some scepticism to the Chancellor’s projections that the UK will achieve a significant surplus by the end of this parliament, suggesting that more extensive cuts or tax raises could ultimately be required to achieve this goal. While Wednesday’s raft of unemployment data revealed an uptick in wage growth this more bullish data was nevertheless eclipsed by the day’s Budget developments.
Later today the Bank of England (BoE) will deliver its latest rate decision and accompanying meeting minutes, with policymakers expected to maintain a dovish tone with regards to monetary policy. Should the BoE continue to emphasise the downside risks facing the UK economy it is likely that the Pound will remain on softer form against rivals.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Climbs Today ahead of Eurozone CPI
Dramatically improved Eurozone Construction Output results helped to shore up demand for the Euro (EUR) yesterday, indicating some measure of strength within the currency union’s economy. Despite stronger US data the single currency was bolstered further in response to the Federal Open Market Committee’s (FOMC) policy meeting. As the dovish tone of policymakers drove the US Dollar (USD) into a sharp slump the Euro saw a corresponding rise across the board, benefitting from the negative correlation of the Euro to US Dollar (EUR/USD) exchange rate.
Traders are expected to continue piling into the common currency this morning, providing that there are no shocks from the finalised February Eurozone Consumer Price Index. However, the likely reminder that the currency union remains in negative inflation could equally be enough to spur some movement away from the Euro.
US Dollar (USD) Exchange Rate Slumps in Response to Dovish FOMC Meeting
Confidence in the ‘Greenback’ has taken a beating following the revision of the FOMC’s monetary policy forecast, with policymakers now pencilling in just two hikes over the course of the year rather than the four previously estimated. Placing emphasis on the risks of negative global developments, Chair Janet Yellen struck a rather more dovish tone than markets had anticipated. This counteracted the impact of the day’s stronger-than-expected Consumer Price Index report, which had shown that inflationary pressure in February had bettered forecast at 1.0% rather than 0.9%.
Although this afternoon’s Philadelphia Fed Survey and Leading Indicators figure are predicted to show fresh signs of improvement the US Dollar exchange rate is expected to remain on a downtrend due to the Fed’s dovishness.
Current GBP, EUR, USD Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending lower at 1.2671, while the Pound Sterling to US Dollar (GBP/USD) pairing was making gains in the region of 1.4303. Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate was on an uptrend at 1.1291.