Euro (EUR) Bolstered by Unchanged German Inflation Data, ‘Greenback’ (USD) Failed to Rally on Hawkish Policymaker Comments
As the release of the September UK Consumer Price Index data approaches Pound (GBP) trading has taken on a more cautious tone, while the single currency (EUR) has strengthened on the back of unchanged finalised German CPI figures. The US Dollar (USD), meanwhile, remains soft in spite of hawkish comments by Atlanta Federal Reserve President Dennis Lockhart that demonstrated continued confidence in the prospect of a 2015 Fed interest rate hike.
Consequently, the GBP/EUR exchange rate was on a downturn on Tuesday morning in the range of 1.3477, while the GBP/USD pairing was climbing in the region of 1.5361.
Monday is likely to be a relatively slow day for both the GBP/EUR and GBP/USD exchange rates due to a lack of major data releases, allowing the Pound (GBP) to make limited gains against rivals.
Appeal of Pound Sterling (GBP) Lowered by Dovish Data as UK’s Economic Strength Remains in Question
Ahead of the weekend the Pound (GBP) was weighed down by the release of the UK’s Visible Trade Balance and Construction Output figures, all of which fell short of forecast improvements. Most concerning for traders was the wider than anticipated national trade deficit, as the result clocked in at -11.1 billion Pounds rather than -9.9 billion. Indicating that economic recovery in the UK remains fragile, this prompted a fresh downturn for Sterling which was only worsened by comments from Chancellor of the Exchequer George Osborne. Speaking at the IMF-World Bank Annual Meeting in Peru, Osborne stoked slowdown fears with comments that the UK is not insulated from global economic risks.
With very little in the way of data due for release today the Pound is likely to remain on its current trend against rivals, with limited incentive for investors to return to the softer currency.
Slowdown Worries Plague the German Economy as Euro (EUR) Benefits from ECB Policymaker Confidence
It was not a particularly strong week for the Euro (EUR) either, as a number of major economic reports demonstrated that the German economic powerhouse was beginning to falter amid wider global pressures. Germany’s Factory Orders, Industrial Production and Trade Balance all printed at weaker than expected levels. Given the importance of this particular economy as the central pillar of the Eurozone the cumulative impact of these results saw the common currency begin to lose favour towards the end of the week.
As the latest European Central Bank (ECB) meeting minutes were released, however, the Euro saw another upsurge thanks to the apparently reduced odds of near-term monetary loosening measures. This helped to push the GBP/EUR exchange rate to a weekly low of 1.3465 as demand for the single currency increased.
US Dollar (USD) Remains Weighed Down by Diminishing Odds of 2015 Fed Interest Rate Rise
Bets have continued to stall on the chances of a 2015 interest rate hike from the Fed, as the September Federal Open Market Committee (FOMC) minutes revealed slightly more dovish sentiment from policymakers. The minutes release followed several days of disappointing domestic data, as the Non-Manufacturing PMI fell and the August Wholesale Inventories showed a larger slowing in consumer demand. With indications pointing towards a weakening US economy pundits were inclined to move away from the ‘Greenback’ (USD), particularly as commodity prices rallied and the appeal of higher-risk currencies rose.
Although Atlanta Federal Reserve President Dennis Lockhart maintained on Friday that an October rate rise was not off the table, these hawkish words nevertheless failed to encourage a rally for the softened ‘Buck’. Monday will see speeches from other members of the FOMC, however, these are unlikely to provoke a particular turnaround in sentiment towards the US Dollar.
Current GBP, EUR, USD Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was on a modest uptrend in the region of 1.3502, while the Pound Sterling to US Dollar (GBP/USD) pairing was continuing to make gains around 1.5361. Meanwhile, the Euro to US Dollar (EUR/USD) conversion rate was also on the rise in the range of 1.1375.