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GBP/EUR, GBP/USD Exchange Rates Retreat as UK Trade Deficit Falls Short of Forecast

Thanks to dovish Bank of England (BoE) meeting minutes and a disappointing UK Visible Trade Balance figure the Pound (GBP) is struggling against rivals today.

UK Visible Trade Balance Pushes Down Pound (GBP) Today on Wider-than-Forecast Deficit

After a weakened September RICS House Price Balance, which unexpectedly slid from 55% to 44%, the Pound (GBP) trended lower against many of its rivals. With the positive sentiment towards the currency somewhat fragile, traders were far from encouraged by the release of Thursday’s Bank of England (BoE) meeting minutes. Although interest rates were left unchanged from their record low of 0.5% by a vote of 8-1, as anticipated, the accompanying commentary from policymakers seemed to confirm that a rate hike would not be on the table any time soon, largely due to a lack of inflationary pressure. Consequently, many economists pushed back estimates for the date of the beginning of the monetary tightening cycle, more now envisioning its arrival in the second or third quarters of next year.

Sterling suffered a fresh downturn this morning as the UK’s August Visible Trade Balance demonstrated that the national deficit had failed to narrow as far as forecast. A bad sign for the wider domestic economic situation, this spurred pundits to once again move away from the weakening Pound.

Cautious European Central Bank (ECB) Minutes Fail to Weigh on Dominant Euro, GBP/EUR Pairing Remains in Slump

Yesterday’s German Trade Balance proved to be disappointing as the national surplus narrowed by a greater degree than expected, falling from 25 billion Euros (EUR) to 15.3 billion. Nevertheless the single currency remained resilient, buoyed by the prospect of a smoothing path towards the next tranche of Greek bailout funds as Prime Minister Alexis Tsipras and his coalition government won a parliamentary vote of no-confidence.

With the publication of the European Central Bank (ECB) monetary policy meeting minutes the common currency was shored up further. In spite of concerns with emerging markets and the current global slowdown policymakers did not give particular indication of a desire to imminently implement fresh monetary loosening measures. As such, the Euro continued to uptrend against rivals throughout the day and is holding its gains on Friday morning.

US Dollar (USD) Extends Losses as Dovish Federal Open Market Committee (FOMC) Prompts Fresh Downturn

There was little support for the ‘Greenback’ (USD), however, as US Continuing Jobless Claims rose on the week and the latest Federal Open Market Committee (FOMC) meeting minutes were revealed to be of a more dovish tone. Odds for a 2015 interest rate rise from the Fed were lowered further as policymakers were shown to remain concerned with the weak inflationary outlook and wider global economic conditions. Given the unsupportive nature of domestic data throughout the last week, this saw a rise in risk sentiment and a continued softening of the declining US Dollar.

Current GBP, EUR, USD Exchange Rates

At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was slumping sharply at 1.3555, while the Pound Sterling to US Dollar (GBP/USD) pairing was on a downtrend in the region of 1.5340. The Euro to US Dollar (EUR/USD) conversion rate was rising in the range of 1.1316.