The Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates were both trending higher in Thursday’s trading as traders sought out the British currency as a standoff between Greece and its creditors took place and investors priced in a Bank of England (BoE) interest rate hike.
Greek PM Tsipras: Euro Summit On Greece Is Positive Development — RTRS -Those Betting On Crisis Will Be Proven Wrong
— Live Squawk (@livesquawk) June 19, 2015
The situation in Greece continued to worsen on Thursday with Greek finance minister Yanis Varoufakis stated that he didn’t believe a deal would be made between Greece and its creditors today.
UK Wage Growth Jumps, UK Unemployment Rate Stable – Pound (GBP) Exchange Rate Climbs
Wednesday saw the BoE minutes released and revealed that the Monetary Policy Committee (MPC) vote unanimously to keep rates on hold. Additionally, UK labour market data printed favourably with the UK Unemployment Rate remain ing at 5.5%, while Average Weekly Earnings both excluding and including bonuses jumped from 2.3% to 2.7% in April.
Currency strategist Adam Cole commented: ‘The wage numbers definitely supersede the BoE minutes. [The] acceleration in wage growth was on track and takes us a step closer to tighter policy and bullish Sterling as a result.’
Pound Sterling (GBP) Trends Higher on BoE Rate Hike Hopes Ahead of UK Wage Growth and Unemployment Ecostats
The Pound Sterling (GBP) exchange rate was able to advance against 14 major currencies after UK inflation data showed an improvement in consumer prices had taken place. The May ecostat rose from deflation at -0.1% to growth at 0.1%. The Core Consumer Price Index (CPI) also registered a gain from 0.8% to 0.9%.
Wednesday saw the Pound Sterling to US Dollar (GBP/USD) exchange rate remain in a narrow range ahead of UK wage growth, UK Unemployment Rate and UK Employment Change data, while the Pound Sterling to Euro (GBP/EUR) exchange rate was trending lower while the situation in Greece continues.
Standard Chartered Predict Pound Sterling (GBP) Safe-Haven Quality will Continue as Greece Struggles to Reach Deal
Additionally, the Pound looks appealing to many as the BoE gears up to hike interest rates.
Standard Chartered currency strategist Eimear Daly commented: ‘In the very near term, Sterling is going to remain strong as it is going to be bid from what is happening in Greece. It has had a safe-haven complex and right now is the perfect timing for it to kick in.’
It’s a very distinct possibility that the Bank of England (BoE) meeting minutes released on Wednesday will show that one or perhaps two policymakers voted in favour of interest rate hikes in June.
BoE Monetary Policy Committee (MPC) hawk Ian McCafferty recently stated: ‘With some of the headwinds to the economy… now starting to fade, we are approaching the time when monetary policy will need to begin its journey back to more ‘normal’ settings.’
The Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates could also rally significantly on Wednesday if upbeat UK labour market data emerges.
UK Average Weekly Earnings, Employment Change and Unemployment Rate stats will all be out in Wednesday’s European trading and could significantly impact the Pound Sterling (GBP) exchange rate.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trending at 1.5626.
The Pound Sterling to Euro (GBP/EUR) exchange rate is trending at 1.3910.
Goldman Sachs Forecast September Federal Reserve Rate Hikes, US Dollar (USD) has Potential to Rally
Meanwhile, the US Dollar will be in for an interesting day on Wednesday as well with the latest Federal Open Market Committee (FOMC) announcement on monetary policy. The Federal Reserve is unlikely to make any changes to its interest rate until the end of the year, but the follow-up comments could prove vital to the US Dollar’s (USD) strength.
Goldman Sachs commented: ‘The overarching message from the meeting will probably be that September remains the Committee’s baseline expectation for the start of monetary tightening, reflecting cumulative progress in the recovery over the last six years.’
‘While September remains out baseline as well, we think that the FOMC will want to preserve optionality at the June meeting, and there is still a significant probability that the hiking cycle will not begin until December or later.’
Thursday will also be a major day for US Dollar movement with the release of US inflation statistics.
The US Dollar to Euro (USD/EUR) exchange rate is trending at 0.8898.
The US Dollar to Pound Sterling (USD/GBP) exchange rate is trending at 0.6402.
Grexit on the Cards as Greece Fails to Make Deal Blaming the IMF, Euro (EUR) Exchange Rate Trends Lower
Meanwhile, uncertainty shrouds the Eurozone and industry experts are placing bets on the possibility of a Greek exit (Grexit).
Greek Prime Minister Alexis Tsipras seems to be getting desperate as negotiations fail to go his way, stating: ‘The IMF [International Monetary Fund] has criminal responsibility for today’s situation. Right now, what dominates is the IMF’s harsh views on tough measures, and Europe’s on denying any discussion over debt viability. The fixation on cuts… is most likely part of a political plan… to humiliate an entire people that has suffered in the past five years through no fault of its own.’
The Eurogroup meeting on Thursday 18th June could prove a major source of market movement for the Euro (EUR) exchange rate.
Just to be clear, here the *normal* IMF procedure in case of a missed payment. But Greece is unique, right? pic.twitter.com/gHLhUqPlAt
— Fabrizio Goria (@FGoria) June 18, 2015
The Euro to US Dollar (EUR/USD) exchange rate is trending at 1.1266.
The Euro to Pound Sterling (EUR/GBP) exchange rate is trending at 0.7169.