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Pound Sterling (GBP) Exchange Rates Soften Versus Euro (EUR), US Dollar (USD) as Correctional Trading Ends

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Decline on Robust German Construction Output

The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.6% on Friday morning.

Although British New Car Registrations advanced significantly by 8.4% on the year in February, the report had no impact on the UK Pound.

This is due to negative sentiment after yesterday’s data showed February’s UK Services output declined beyond expectations. The services sector is the single largest component of UK gross domestic product so the slowdown was poorly received.

Markit chief economist Chris Williamson added: ‘Survey responses reveal that firms are worried about signs of faltering demand, but boardrooms have also become unsettled by concerns regarding the increased risk of ‘Brexit’, financial market volatility and weak economic growth at home and abroad.’

Today has also marked the first day this week in which the British Pound has not made gains irrespective of domestic data. The UK asset has enjoyed appreciation versus nearly all of its major peers recently thanks to corrective trading amid concerns the recent slide was overdone. This suggests that corrective Sterling trading has now ended.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2870.

Meanwhile the Euro strengthened versus most of its major peers on Friday after domestic data produced positive results. This bucks a recent trend of Euro weakness irrespective of data results amid speculation of aggressive stimulus from the European Central Bank (ECB).

February’s German and Eurozone Retail PMIs both managed to break above the 50 mark that separates growth from contraction. In addition, February’s German Construction PMI showed output rose from 57.9 to 59.6.

In response to the German Retail PMI, Oliver Kolodseike, Economist at Markit stated; ‘February’s survey results provided some positive news for German retailers, as sales rose at the strongest rate since last September, suggesting that consumers were willing to open their purse strings again. Moreover, the forward-looking indicators suggest that sales growth should be maintained in coming months, with the level of positive sentiment reaching a record high and companies stocking up in anticipation of rising demand. However, with purchase costs increasing sharply (although slower than in January), gross margins continued to be squeezed.’

Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Hold Losses ahead of US Labour Market Data

The Pound Sterling to US Dollar (GBP/USD) exchange rate declined by around -0.3% on Friday morning.

Ahead of key US labour market data the US asset edged higher versus some of its major peers. Gains have been limited by Euro strength, however. February’s Unemployment Rate and Change in Non-Farm Payrolls data is likely to cause significant US Dollar volatility.

Currency analyst Valeria Bednarik said; ‘What can be expected from this Payroll? Well, actually not much, even if it results are much better-than expected. There are two main factors behind this statement: first, soft local data keeps coming in, and just one strong figure won’t be enough to confirm the turmoil is over. Second, and despite the fact jobs plunged in January to 151,000, employment has been steadily growing for the past two years, the unemployment rate stands at 4.9%, the best reading in over 6 years, meaning it is far from being a concern in the economic scheme.’

Mounting pessimism regarding Federal Reserve policy outlook, with global economic conditions presenting an unfriendly environment for tighter policy, is likely to limit US Dollar gains even if labour data betters expectations.

The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4134.

Pound Sterling Exchange Rate Forecast: EU Referendum Fears to Cause GBP to EUR, USD to Resume Depreciation

Now that corrective trading has seemingly abated, there is every chance that the Pound will fall again in response to EU referendum uncertainty. Domestic data next week may also be more impactful without corrective trade dominating movement.

The Euro will be likely to come under significant pressure as we draw closer to the March 10th ECB interest rate decision. Similarly, the US Dollar is likely to be subject to downside risks ahead of the March 16th Federal Reserve interest rate decision.

The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.2860 to 1.2950.

The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.4118 to 1.473 during Friday’s European session.