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Pound Sterling Forecast: GBP/EUR, GBP/USD Exchange Rates Steady ahead of Eurozone Inflation

UPDATE

On Friday morning the Pound Sterling to Euro (GBP/EUR) and US Dollar (GBP/USD) exchange rates were trending within a limited range.

After British Consumer Confidence dropped unexpectedly, and German Retail Sales data missed estimated growth, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending narrowly. Meanwhile, the US Dollar is holding steady versus its major peers ahead of a plethora of domestic data publications including wage growth data.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3931.

The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5333.

Yesterday…

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Decline after Positive German Labour Market Data

The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.4% on Thursday morning.

British economic data produced a mixed-bag of results on Thursday but a general Sterling depreciation can be linked to traders taking profits following an overnight rally. After the Federal Open Market Committee (FOMC) left the door open for a December rate hike, the Pound rallied thanks to Euro weakness and the fact that the Bank of England (BoE) is not expected to alter policy ahead of the Federal Reserve.

Thursday’s domestic data results produced mostly positive results. Net Consumer Credit and Net Lending Securities on Dwellings bettered estimates in September, but Mortgage Approvals came in below the median market forecast. In addition, October’s Nationwide House Prices advanced beyond the market consensus.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3916.

In contrast to the Pound, the shared currency dived in response to speculation regrading a December Fed rate hike. This was mainly the result of negative correlation, but the prospect of widening divergence with regards to policy outlook between the Fed and the European Central Bank (ECB) also spooked investors. However, as traders took US Dollar profits the shared currency made a fractional recovery.

Also aiding the common currency uptrend was mostly positive domestic data on Thursday. October’s German Unemployment Change saw -5,000 unemployed, bettering the median market forecast -4,000 although September’s figure was negatively revised to show a rise in unemployment of 1,000. October’s seasonally-adjusted German Unemployment Rate held at 6.4%. In addition, Eurozone Economic Confidence defied expectations of a drop from 105.6 to 105.1 in October, with the actual result rising to 105.9.

Pound Sterling to US Dollar (GBP/USD) Conversion Rate Predicted to Hold Steady ahead of US GDP

The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within a limited range on Thursday morning.

In response to the better-than-forecast Nationwide House Prices survey, Robert Gardner, an economist at Nationwide said; ‘The housing market should be able to cope with higher interest rates in the year ahead, provided the increase is modest and the economy and the labour market remain in good shape.’ Whilst Howard Archer, economist at IHS Global Insight, stated; ‘We expect house prices to see solid increases over the coming months amid relatively decent activity and a shortage of properties.’ Certainly the drop in mortgage approvals is likely to keep house prices competitive.

The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5267.

Now that traders have digested the FOMC rate decision and hawkish accompanying statement, the US asset is holding a comparatively strong position versus its major peers. A slight drop from overnight levels can be linked to investor profit taking. Later on Thursday, the third-quarter US Gross Domestic Product data will be likely to provoke significant volatility. A positive reading will further bolster hopes that the Fed will be hiking the cash rate within 2015. US labour market data will also be of interest to Fed policymakers with a view to assessing the state of domestic labour conditions to make sure a rate hike is feasible.

Pound Sterling Exchange Rate Forecast: Fed Rate Hike Bets to see GBP Gain

If the immediate aftermath of the hawkish Fed statement is a sign of things to come, the Pound is likely to rally versus its major peers. With the British and North American central banks considering tighter policy at a time when the ECB, Bank of Canada (BOC), Reserve Bank of New Zealand (RBNZ) and the Reserve Bank of Australia (RBA) are contemplating further easing, the Pound and US Dollar could potentially dominate in 2016.

Friday could see Sterling volatility with the publication of October’s GfK Consumer Confidence Survey (which is predicted to rise from 3 to 4). Additional movement will likely come in response to Eurozone inflation data and US wages data.

The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.3897 to 1.3997.

The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.5248 to 1.5275 during Thursday’s European session.