Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Trend within a Limited Range after Eurozone Money Supply Growth Missed Estimates
The Pound Sterling to Euro (GBP/EUR) exchange rate edged lower by around -0.2% on Tuesday afternoon.
Despite weaker-than-expected British growth data, the Pound saw minimal impact and held steady versus most of its major peers. This is likely due to the fact that the quarterly 0.5% growth in the third-quarter is still considered robust enough not to trouble Bank of England (BoE) policymakers. On the year, UK GDP came in at 2.3% growth in the third-quarter; missing the median market forecast 2.3%. In addition, August’s Index of Services data failed to meet with market consensuses on both a monthly and three-monthly basis.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3861.
Over the Channel, Eurozone money supply failed to meet with expected growth. September’s Eurozone M3 was predicted to show a seasonally-adjusted supply increase of 5.0%, but the actual result only reached 4.9%. Teunis Brosens, Research Analyst at ING, stated; ‘Overall, today’s M3-report shows a slowly but steadily improving credit environment in the Eurozone. The faltering of bank credit to non-financial business is an important dissonant however, and one that is not yet mirrored in other indicators. This may be a glitch, so we’ll be closely watching next month. In any case, it seems difficult to point at this report, with its strong M1-growth, as convincing justification for further monetary easing in December. For that, ECB-president Draghi will have to look elsewhere.’
Pound Sterling to US Dollar (GBP/USD) Conversion Rate Forecast to Hold Steady ahead of US Durable Goods Orders
The Pound Sterling to US Dollar (GBP/USD) exchange rate declined by around -0.3% on Tuesday afternoon.
In response to the British growth data, Zach Witton, deputy chief economist at manufacturers’ organisation EEF said: ‘Growth was partly dragged back due to manufacturing remaining in recession. The weakness was broad based across the sector as recent challenges have been exacerbated by the sharp contraction in iron and steel and signs of slower demand from the consumer sector. Yet the news wasn’t wholly negative, with bright spots including transport equipment doing well thanks to a backlog of aircraft orders and manufacturers still maintain some, albeit muted, confidence about their longer-term business prospects.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5311.
As traders await US Durable Goods Orders and Consumer Confidence data, the North-American asset is trading flatly. Whilst both the aforementioned reports hold heavy economic weighting, movement in response to the results is likely to be exaggerated with the Federal Open Market Committee (FOMC) interest rate decision just around the corner. September’s US Durable Goods Orders is expected to contract by -1.3%, and October’s Consumer Confidence is predicted to hold steady at 103.0. Any poor results are likely to be punished significantly amid speculation that policymakers will latch on to any excuse to continue ultra-loose monetary policy.
GBP/EUR, GBP/USD Exchange Rate Forecast: Volatility Expected ahead of FOMC Rate Decision
As mentioned above, the forthcoming US data publications which precede the FOMC interest rate decision will provoke significant market volatility. The Euro and Pound Sterling will also be heavily impacted by US data results. Positive US data outcomes will support a Sterling uptrend given that many believe that the BoE will avoid hiking the cash rate ahead of the Federal Reserve. Positive data would also cause the Euro to slump thanks to negative EUR/USD correlation.
As traders digest the slower-than-forecast British growth, however, there is the potential for Sterling bearishness. But the divergent policy outlooks between the ECB and the BoE and Fed should keep both the Pound and the US Dollar trending in a position of strength versus the common currency.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.3826 to 1.3908 during Tuesday’s European session, whilst the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.5279 to 1.5359.