In spite of a lack of domestic data today Pound Sterling (GBP) has been making gains against rivals, as the Euro (EUR) softens in response to German political developments.
Pound Sterling (GBP) Exchange Rate Strengthens ahead of UK Budget
Developments on Pound Sterling (GBP) are somewhat limited on Monday morning as investors lack anything in the way of domestic data. Instead markets are focusing on Chancellor of the Exchequer George Osborne’s upcoming budget, with expectations increasingly gloomy as Osborne looks set to announce a fresh round of cuts.
Thursday’s Bank of England (BoE) policy meeting is also likely to drive demand for the Pound in the coming week, despite the likelihood that policymakers will make no changes at this juncture. Of particular interest will be the tone of members of the Monetary Policy Committee (MPC) in the accompanying meeting minutes, with any signs of dovishness expected to promptly dent the appeal of Sterling.
ECB Stimulus Pushes Down on Euro (EUR) with Shakeup in German State Elections
Following the European Central Bank’s (ECB) surprisingly wide raft of monetary policy measures deployed on Thursday the Euro (EUR) has continued to shed value against rivals. Investors remain concerned over the potential effectiveness of this latest volley of intervention, although markets have increasingly dismissed President Mario Draghi’s comment that interest rates are unlikely to fall further.
Confidence has also taken a blow today in the wake of the German state elections held over the weekend, as Chancellor Angela Merkel’s ruling party lost two seats and the anti-refugee party Alternative für Deutschland made significant gains. With the mood in the Eurozone’s powerhouse economy starting to see a notable shift, this has helped to accelerate the losses of the single currency, despite expectations for stronger Eurozone Industrial Production data later in the day.
US Dollar (USD) Exchange Rate Strengthens despite Expectations of Fed Rate Hold
Unexpectedly improved Import Price Index figures helped to shore up the US Dollar (USD) ahead of the weekend, with the persistent contraction in prices beginning to ease somewhat. The relative slump of the Euro equally pushed the ‘Greenback’ higher across the board, as the increasing divergence between the Fed and ECB drove movement on the Euro to US Dollar (EUR/USD) exchange rate.
The US Dollar may struggle to hold onto its gains on Tuesday, however, as February’s Advance Retail Sales are expected to show a decline on the month. With consumer confidence in the world’s largest economy apparently faltering, expectations are not high ahead of the Federal Open Market Committee’s (FOMC) March meeting. Markets are not pricing in any action from the Fed until June at the earliest and should policymakers lend support to this belief then the ‘Greenback’ is predicted to soften.
Current GBP, EUR, USD Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was making gains around 1.2921, while the Pound Sterling to US Dollar (GBP/USD) pairing was trending narrowly at 1.4380. Meanwhile the Euro to US Dollar (EUR/USD) exchange rate was slumped in the region of 1.1125.