Greek Bailout Progressing as GBP/EUR Dips Ahead of UK CPI
With approvals from Latvia and Lithuania yesterday the Greek bailout continues to inch closer to the final agreement and implementation, however it still faces votes in a number of other European parliaments. Although German Chancellor Angela Merkel is not expected to have the full support of her party in the vote the outlook still appears optimistic and the chances of a Bundestag pass for the bailout are considered good. Ahead of this, and today’s UK Consumer Price Index, the GBP/EUR exchange rate is trending in the range of 1.4055.
The GBP/USD pairing, meanwhile, is currently in a minor downtrend at 1.5566.
GBP/USD Pairing Slips as Housing Data Shores up the ‘Greenback’
A decent showing for the US on the NAHB Housing Market Index, meeting forecast at 61, has strengthened the ‘Greenback’ this afternoon to send the GBP/USD pairing into a slump at 1.5590. The hawkish trading on the Pound that had been inspired by the comments of Monetary Policy Committee (MPC) member Kristin Forbes was ultimately quite short-lived, particularly given the current lack of support for any further speculation on a more imminent interest rate rise.
An optimistic outlook for the Pound (GBP) returned today due to encouraging comments from a member of the Monetary Policy Committee (MPC), with Sterling-led exchange rates also benefitting on the softening of the common currency (EUR) and ‘Buck’ (USD).
GBP/EUR Exchange Rate Up as Bundestag Hesitance Raises Concerns over Greek Bailout
The combination of a not-disappointing UK Construction Output, coming in at 2.6%, and continued uncertainty over the passage of the Greek bailout package boded well for the GBP/EUR exchange rate ahead of the weekend. Having climbed on Friday from a near-weekly low of 1.3973 to reach 1.4088, the pairing has continued trending strongly this morning.
Some of this is no doubt attributable to recent comments from Bank of England (BoE) Monetary Policy Committee (MPC) member Kristin Forbes. Raising concerns over the implications of holding off too long on beginning to increase interest rates, Forbes reignited speculation that a hike could still occur before the end of the year. Naturally this spurred the Pound (GBP) out of its bearish state of the previous week, allowing the GBP/EUR pairing to make further gains.
Tomorrow’s Consumer Price Index for the UK is also likely to inspire movement, with a strong showing potentially bolstering the GBP/EUR exchange rate still further. The Euro (EUR), meanwhile, will be relying predominantly on news of the Greek bailout for any potential rally, with the Bundestag vote on Wednesday playing a significant role. As Germany appears to remain generally reticent about the details of the deal, in particular the crucial involvement of the International Monetary Fund (IMF), investors are likely to hedge their bets ahead of Thursday’s imminent European Central Bank (ECB) repayment deadline. However, a decided approval from Germany would doubtless inspire resurging confidence.
At present the Pound Sterling to Euro (GBP/EUR) exchange rate is trending positively at 1.4134, with the Euro to Pound Sterling (EUR/GBP) pairing in a downtrend around 0.7075.
Influence of Chinese Depreciation on ‘Buck’ (USD) Diminishes, GBP/USD Exchange Rate Buoyant
Industrial and Manufacturing Production rose in July for the US, surpassing expectations of sector contractions, to build on the growth of the previous month and suggest that the condition of the domestic economy is now seeing a clear improvement. However, in spite of the fact that this data appears to support the chances of a September interest rate hike from the Fed, the ‘Greenback’ (USD) was unable to particularly capitalise on the report. Presumably it was continuing concerns over a potential currency war in the Australasian region and the state of China that overshadowed these otherwise encouraging figures. Consequently the GBP/USD exchange rate was quick to rebound from an initial dip to reach a fortnightly-high and remained strong coming into the new week.
This morning saw the GBP/USD pairing climb still higher to strike a fresh monthly peak of 1.5677, as the words of MPC member Kristin Forbes rekindled optimism in an approaching UK rate hike. Should her arguments ultimately prove convincing to the other members of the MPC there may still be a chance for a hike before the end of the year, possibly even ahead of the Fed, which is an encouraging thought for pundits.
The afternoon’s US Housing Market Index and Net Long-term TIC Flows could stand to provide a rally for the US Dollar though, particularly after a good few days of relative quiet on the eastern front as the record run of devaluations on the Yuan (CNY) have not resumed. Consumer Price Index data for the UK tomorrow, however, could spur the pairing to greater highs if the figure posts strongly to give further support to the week’s renewed interest rate speculation.
At time of writing the Pound Sterling to US Dollar (GBP/USD) exchange rate is trending narrowly at 1.5646, while the US Dollar to Pound Sterling (USD/GBP) pairing remains bearish at 0.6391.