Weaker-than-Expected UK Sales Prompt Pound Sterling (GBP) Exchange Rate Downtrend Today
Overnight the UK’s BRC Like-For-Like Sales fell short of forecast to print at 0.1% rather than 0.5%, which although an improvement on the year still saw demand for the Pound (GBP) dented. Ahead of another relatively light data day for both the US and the Eurozone the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates have been trending lower.
Strong US Labour Market Conditions Fail to Shore up US Dollar (USD) Today
Despite December US Labour Market Conditions Index Change printing at a substantially stronger level than expected, in line with an upwardly revised November figure, the US Dollar (USD) has remained softer against the Pound (GBP). Demand for the Euro (EUR) has also failed to pick up, leaving the GBP/EUR exchange rate trending higher in the range of 1.3365.
Although the Pound (GBP) is missing the input of domestic data on Monday it has nevertheless been making gains against the Euro (EUR) and US Dollar (USD), recovering from multi-month lows.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Shored up from Six-Year Low
Ahead of the weekend both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates weakened as investors saw little incentive to buy back into the softened currency. Chancellor of the Exchequer George Osborne had encouraged this bearishness with warnings that the UK economy remains vulnerable to a ‘cocktail of threats’ which could see growth slow in the coming year. This more dovish assessment was not dispelled by the Visible Trade Balance, as the national trade deficit failed to narrow quite as far as pundits had hoped. With the likelihood of a near-term Bank of England (BoE) interest rate hike continuing to diminish, the GBP/USD exchange rate slumped to a six-year low of 1.4505 while the GBP/EUR pairing hit an eleven-month low of 1.3242.
While Sterling has been retaking some of its recent losses on Monday morning this rally may struggle to sustain itself as fresh domestic data will be lacking until Tuesday. Should November’s Manufacturing Production show a continued contraction, however, the Pound could weaken further.
Eurozone Investor Confidence Falls to Weigh on Euro (EUR) Exchange Rate Today
Although German Industrial Production figures proved largely disappointing on Friday the Euro nevertheless remained on generally stronger form against rivals, despite a relative calming of the Chinese stock markets reducing safe-haven demand. A smaller-than-expected narrowing of the German Trade Balance helped to keep confidence in the single currency high, indicating that the Eurozone’s powerhouse economy remains in a relatively strong position. Pundits also remain less than convinced of the possibility of the European Central Bank (ECB) opting to loosen monetary policy further in the near future, allowing the Euro to advance across the board.
Despite fresh turmoil on the Shanghai Composite Index, which saw another 5% shaved off share prices, the common currency has lost much of its bullishness today. The latest Eurozone Sentix Investor Confidence figure failed to particularly encourage confidence in the Euro, as the index slipped further than expected from 15.7 to 9.6.
US Dollar (USD) Currency News: Bullish Non-Farm Payrolls Bolster Odds of Second Interest Rate Hike
There was a somewhat mixed reaction among markets to the December US Non-Farm Payrolls, which substantially bettered forecast to print at 292,000 rather than 200,000. This stronger pace of job creation seemed to suggest that the Federal Open Market Committee (FOMC) was right to raise interest rates at the final policy meeting of 2015, while encouraging speculation that the Fed might make a second hike sooner rather than later. However, as wage growth was found to be disappointing, the report was ultimately not strong enough to eliminate concerns that the domestic economy was not as robust as hoped.
Current GBP, EUR, USD Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was making strong gains in the region of 1.3376, while the Pound Sterling to US Dollar (GBP/USD) pairing was on an uptrend around 1.4558. Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate was trending lower at 1.0886.