The Pound Sterling to Euro (GBP/EUR) exchange rate recorded losses in Wednesday’s European trading after UK inflation fell below forecasts to hit 0.0%, while the Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Canadian Dollar (GBP/CAD) exchange rates climbed.
Earlier… The Pound Sterling to Euro (GBP/EUR) and Pound Sterling to Canadian Dollar (GBP/CAD) exchange rates were both trending lower in the first half of Tuesday’s European session while the Pound Sterling to US Dollar (GBP/USD) exchange rate remained in a tight range ahead of UK inflation figures.
Meanwhile, German Services and Manufacturing Purchasing Managers Indexes (PMI) printed better than forecast offering the Euro a jump.
Earlier… The Pound Sterling to US Dollar (GBP/USD), Pound Sterling to Euro (GBP/EUR) and Pound Sterling to Canadian Dollar (GBP/CAD) exchange rates all began Monday’s European session trending lower as the prospect of a political shakeup in the UK saw the Pound Sterling flop.
Adding to general election woes is loaded speculation regarding Britain’s future within the European Union, a factor that could seriously weigh on the GBP/USD, GBP/EUR and GBP/CAD currency pairs.
Open Europe’s latest report suggests that the UK could prosper if it leaves the EU—an event termed a ‘Brexit’—and widens its free trade and deregulation stance.
Open Europe stated: ‘Our estimates of the impact of Brexit range between the UK being 2.2% of GDP [Gross Domestic Product] worse off in 2030 if it leaves and reverts into protectionism; to UK being 1.6% of GDP better off in 2030 if it leaves and pursues economic liberalism.’
While political party UKIP hope to offer a referendum this year, the Conservatives wish to wait until 2017 for a vote.
Euro Exchange Rate (EUR/GBP, EUR/USD, EUR/CAD) Awaits Greek Negotiations Outcome
Meanwhile, the Euro to Pound Sterling (EUR/GBP), Euro to US Dollar (EUR/USD) and Euro to Canadian Dollar (EUR/CAD) exchange rates are still under heavy pressure from the prospect of Greece leaving the Eurozone, a ‘Grexit’.
Federal Reserve official James Bullard stated that it’s possible for a Grexit to occur, but that the process would be devastating for Greece.
Bullard commented: ‘I think it’s (Grexit) much more manageable than it would have been a couple of years ago and so I do think it could be done but I don’t think it’s advisable to try to go down that path.’
‘Greece would face a very different and I think bleak future if it went in that direction but I don’t think the spillover into international markets as it would have been.’
German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras are scheduled to meet later on Monday and any developments between the two nations could impact EUR/GBP, EUR/USD and EUR/CAD trading.
In comparison to both the Pound and the Euro, the US Dollar has remained extremely strong in recent months as investors’ price in the possibility of a Federal Reserve interest rate hike.
St Louis Federal Reserve President James Bullard commented that if the central bank waits too long before hiking interest rates, a bigger increase in borrowing costs could be needed.
US Dollar to Euro (USD/EUR) Exchange Rate Strength Accredited to ECB’s QE
In addition, Bullard suggested that a lot of US Dollar strength was a result of European Central Bank (ECB) decisions to begin a period of quantitative easing (QE) causing a major policy divergence between the Fed and the ECB.
Bullard stated: ‘It [QE] is a major development on global financial markets and [that] the run up to that led to a depreciating Euro and a strengthening Dollar is not surprising at all. That has all been priced into markets so I think it’s unclear at this point where the Dollar Euro exchange rates are going to go.’
Crude Oil Softens, Dragging the Canadian Dollar (CAD) Exchange Rate Lower
Meanwhile, the Canadian Dollar exchange rate softened as crude oil declined to $45 per barrel. Furthermore, the Saudi Arabian Organisation of Petroleum Exporting Countries (OPEC) representative has stated that the price of oil is unlikely to rebound to the high levels witnessed last year.
However, many economists have suggested that OPEC is refusing to cut production in an attempt to price US shale oil out of the market.
Mohammed al-Madi said: ‘There isn’t any political dimension in what we do at the oil ministry – our vision is commercial and economic… We are not against anybody or against the [production of US shale gas]. On the contrary, we welcome it, as it balances the market in the long run.’
Pound Sterling Exchange Rate Forecast: GBP/USD, GBP/EUR, GBP/CAD
The Pound Sterling exchange rate (GBP/USD, GBP/EUR, GBP/CAD) is expected to fluctuate later in Monday’s trading with the release of UK CBI Trends Selling Prices and Trends Total Orders stats.
Additionally, the US Dollar to Euro (USD/EUR), US Dollar to Pound Sterling (USD/GBP) and US Dollar to Canadian Dollar (USD/CAD) exchange rates could experience movement when US Existing Home Sales figures emerge and Federal Reserve officials John Williams and Stanley Fischer speak.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate resides at 1.8765. The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading at 1.4920, while the Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the region of 1.3736.