Pound Sterling (GBP) Trends Higher ahead of UK Production Data
Sentiment towards the Pound (GBP) has remained optimistic on Wednesday morning ahead of the latest UK Industrial and Manufacturing Production figures, with pundits anticipating an uptick in industrial output. Consequently the Pound Sterling to Euro (GBP/EUR) exchange rate was trending higher around 1.2861, while the Pound Sterling to US Dollar (GBP/USD) pairing was making gains at 1.4484.
Despite continued market volatility the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates have strengthened on the back of the latest UK trade data.
Pound Sterling (GBP) shored up by Narrowed UK Trade Deficit as ‘Brexit’ Debate Continues
Confidence in the Pound Sterling (GBP) continued to decline on Monday after the BDO Business Optimism Index was found to have pushed lower to touch the neutral baseline of 100, demonstrating that domestic business confidence had fallen to a three-year low in January. Concerns over a possible ‘Brexit’ have been weighing heavily on sentiment and look set to continue doing so over the coming months as debate over the UK’s future in the European Union intensifies.
However, the outlook of the domestic economy was a little improved this morning as the December trade deficit was shown to have narrowed further than anticipated. Printing at -2.71 billion rather than -2.9 billion Pounds this strong showing alleviates some of the pressure that had been coming to bear on Chancellor of the Exchequer George Osborne, who remains in danger of falling short of fulfilling his Autumn Statement pledges. As uncertainty remains the Pound has nevertheless been making some fresh gains against rivals today, regaining some measure of optimism.
Disappointing German Trade Balance Weighs on Euro to Pound Sterling (EUR/GBP) Exchange Rate
Although the temporary closure of the Chinese stock markets has failed to calm volatility as far as investors had hoped, the Euro (EUR) is struggling to gain much support from safe-haven demand. Greece in particular is beginning to attract trader concern once again, with the Greek stock market posting its worst day of losses in more than twenty years on Monday amidst rising worries over anti-austerity protests and the Hellenic nation’s continued recovery.
There has been little incentive to favour the common currency on Tuesday morning as the latest raft of German trade data fell decidedly short of forecast. Printing far lower than anticipated, German Industrial Production slumped from 0.1% to -2.2% on the year in December, while the nation’s trade surplus sharply narrowed from 20.5 billion to 18.8 billion Euros at the end of 2015. Suggesting that negative global headwinds have started to drag down the Eurozone’s powerhouse economy, this has prompted the Euro to weaken across the board today.
US Dollar (USD) Exchange Rate Rallies as Stocks Slump Further Today
Risk aversion has helped to bolster the appeal of the US Dollar (USD) this week, however, in spite of suggestions that the Federal Open Market Committee (FOMC) may have acted prematurely in hiking interest rates in December. Despite speculation that the Fed will not ultimately achieve its initial goal of raising interest rates a further four times over the course of the coming year the ‘Greenback’ has remained largely dominant as markets extend their bearish slump.
As this afternoon’s December Wholesale Inventories figure is expected to show a slight improvement on the month the US Dollar is forecast to extend its gains against rivals, particularly if traders continue to move away from higher-risk assets.
Current GBP, EUR, USD Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending higher at 1.2913, while the Pound Sterling to US Dollar (GBP/USD) pairing was making gains at 1.4436. Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate was slumped around 1.1181.