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GBP/EUR, GBP/USD, GBP/NZD Exchange Rate Forecast: US Dollar Rockets on FOMC Rate Hike Prospects

The British Pound to Euro (GBP/EUR) and British Pound to New Zealand Dollar (GBP/NZD) exchange rates gained in the first half of Thursday’s European trading, while the British Pound to US Dollar (GBP/USD) exchange rate fell after the Federal Reserve hinted that rate hikes could happen in the near future.

Earlier… The British Pound to Euro (GBP/EUR), British Pound US Dollar (GBP/USD) and British Pound to New Zealand Dollar (GBP/NZD) exchange rates began Wednesday’s trading trending lower after the UK Unemployment Rate remained at 5.7% in January and Average Weekly Earnings fell.

The Pound is particularly sensitive to labour market data at the moment as investors attempt to price in a UK interest rate hike. However, the Bank of England (BoE) has been hot and cold on the subject and data appears to be cooling slightly.

Average Weekly Earnings Excluding Bonuses shrank from 1.7% to 1.6% in the three months through January on the year, while earnings including bonuses dropped more significantly from 2.1% to 1.8%. Both wages figures were forecast to climb.

The data doesn’t bode well for the Pound amid a backdrop of political uncertainty in the run up to the May general election. Later in the session, Chancellor to the Exchequer George Osborne will be announcing the pre-election budget statement which could impact the GBP/USD, GBP/EUR and GBP/NZD exchange rates further.

Update: After Osborne’s speech the British Pound continued to trend softer, with -0.75% market movement against the Euro (GBP/EUR), -0.37% against the US Dollar (GBP/USD) and -1.11% against the New Zealand Dollar (GBP/NZD).

The European Central Bank (ECB) began quantitative easing (QE) recently and the central bank believes it has taken effect already—a positive development for the Eurozone. However, the ECB has been met with opposition with over 10,000 protesters staging demonstrations and riots outside of the central bank’s new Frankfurt headquarters.

The Euro has also been sensitive to talks between Greece and its creditors as the nation attempts to renegotiate its austerity package; communications are ongoing and have thus far yielded little result.

However, ECB protesters are sympathising with Greece’s struggle and are campaigning against the austerity measures by holding sit-ins and demonstrations. Police have had to set up a defence perimeter in order to protect the 1.3 billion Euro establishment.

Left-wing politician Martin Dolzer commented: ‘We were moving toward the ECB and then tear gas cartridges were fires from the police lines. [The smoke] spread over a broad area; it was a very strong irritant.’

However, it appears as if confidence in the currency bloc’s equilibrium is coming apart at the seams.

A member of the Attac protest group, Werner Renz, commented: ‘In the past, we protested against things like the rescue of banks in Europe. The focus of our protests this year is on Greece. We need more of Athens in Europe and less of Berlin. There is no way Greece can repay all its debt. The situation can’t be solved by austerity alone.’

ECB President Mario Draghi is expected to speak at today in Frankfurt, which could impact the Euro to British Pound (EUR/GBP) exchange rate.

USD Exchange Rate Forecast to Fluctuate on FOMC Announcement and Yellen Speech

The US Dollar is also forecast to have a wild ride today with the Federal Open Market Committee (FOMC) announcing its latest interest rate decision. Investors in the US Dollar are looking closely at language from the Federal Reserve in the hopes of gauging the timeframe for interest rate hikes.

Fed Chairwoman Janet Yellen will also hold a press conference after the announcement which is likely to cause US Dollar to British Pound (USD/GBP), US Dollar to Euro (USD/EUR) and US Dollar to New Zealand Dollar (USD/NZD) exchange rate movement.

Meanwhile, some of the last data to be published on Wednesday will be New Zealand’s Gross Domestic Product (GDP) figures for the final quarter of last year. The ecostat is expected to record 0.8% growth quarter-on-quarter while the annual figure is forecast to grow from 3.2% to 3.4% in Q4.

Friday could be another day to offer moderate ‘Kiwi’ movement with New Zealand Credit Card Spending released.

British Pound Exchange Rate Forecast: GBP/EUR, GBP/USD, GBP/NZD

The British Pound is likely to fluctuate in the rest of the day on the UK labour market data, with little hope for gains amid general election uncertainty. The Bank of England (BoE) also released its March meeting minutes which showed all policymakers were unanimous in keeping the interest rate at 0.50%.

BoE Chief Economist Andrew Haldane is scheduled to speak in London on Thursday which could impact the Pound, while UK Public Finances and Public Sector Net Borrowing stats emerge on Friday.

The British Pound to New Zealand Dollar (GBP/NZD) exchange rate is trending in the region of 2.0130. The British Pound to US Dollar (GBP/USD) exchange rate is reaching 1.4677. The British Pound to Euro (GBP/EUR) exchange rate is trading at 1.3839.