NEWSFLASH: UK CPI Falls to -0.1% – Pound Declines
Prior to the release of the UK’s inflation data the Pound Sterling to Euro (GBP/EUR) exchange rate was able to achieve a high of 1.3980, although the Pound Sterling to US Dollar exchange rate was struggling around the 1.5537 level.
Economists had expected the UK’s non-core inflation to hold at 0.0% on the year April following a month-on-month increase of 0.4%.
However, consumer prices only gained by 0.2% on the month, resulting in an annual figure of -0.1%.
As the Bank of England (BoE) has long warned that the UK is likely to enter disinflation, the dip didn’t have a massively dramatic impact on the Pound – although the British currency did trim gains against the Euro and extend declines against the US Dollar.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3889
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5538
NEWSFLASH: GBP/EUR Advances, GBP/USD Softens after UK House Price Data
At the start of a fresh week of trading the Pound Sterling to Euro (GBP/EUR) exchange rate recorded a modest gain while the Pound Sterling to US Dollar (GBP/USD) exchange rate edged slightly lower following the publication of UK house price numbers.
The Rightmove report showed a -0.1% month-on-month slide in values in May and a 2.5% annual figure.
With additional UK reports in short supply, investors will now be looking ahead to Tuesday and the release of the UK Consumer Price Index.
If the UK’s non-core CPI actually moved into negative territory, Sterling could fall. Conversely, an uptick in consumer price gains would be Pound supportive.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3808
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5681
Both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates closed out the week trading in slightly softer positions as the rally inspired by the UK general election result ran out of steam.
Pound Sterling to Euro (GBP/EUR), Pound Sterling to US Dollar (GBP/USD) Exchange Rate News – Sterling’s Election Rally Ends on Dovish BoE Despite Rise in UK Construction Output
Although this week’s UK employment figures were fairly upbeat, a dovish inflation report from the Bank of England (BoE) and a consolidating of positions following the election saw the Pound pare some of its initial gains against both the Euro and US Dollar.
According to Bloomberg; ‘After Britain’s May 7 election unexpectedly produced a comfortable win for the Conservative Party, Sterling rallied 3.7% by May 13 to its highest level this year versus the Dollar. Then it pared gains as investors’ attention shifted back to the mixed prospects of the UK economy.’
Even Friday’s sturdy rebound in UK Construction Output wasn’t enough to support Sterling against a rallying Euro and the GBP/EUR exchange rate dropped to 1.37 after hitting highs of 1.40 earlier in the week.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast – Greece Enters Recession but Euro Rallies Ahead of ZEW Sentiment Data
This week the Eurozone published a mixed bag of ecostats, but the Euro still managed to stage a modest rally against rivals like the Pound and US Dollar.
The latest growth figures for the currency bloc showed that Greece entered recession in the first quarter and that the German economy failed to expand by as much as anticipated. However, the French economy grew by more than forecast, and the Eurozone as a whole posted stronger growth than either the UK or the US.
This, combined with a timely debt payment from Greece to the IMF and a more rapid than expected acceleration in German inflation, pushed the Euro to Pound Sterling (EUR/GBP) exchange rate higher.
However, with investors betting that Greece will fail to reach an agreement with its creditors before completely running out of funds, the EUR/GBP rebound may prove short lived.
The Pound Sterling to Euro (GBP/EUR) exchange rate hit a low of 1.3724
In terms of influential data from the Eurozone, perhaps the most important reports to be aware of are the ZEW Economic Sentiment surveys for Germany and the currency bloc as a whole.
Rising confidence could bolster the Euro while falling sentiment would weigh on the common currency.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate News – ‘Cable’ Advances Beyond 1.58 on Poor US Retail Sales Data but Slides on Friday despite Confidence Dip
Over the course of last week the Pound Sterling to US Dollar (GBP/USD) exchange rate surged to its best levels of 2015 so far, climbing above 1.58 as US Retail Sales data added to the recent run of less-than-spectacular releases.
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a high of 1.5720
However, even with the US economy slowing at the beginning of the year, the Federal Reserve is still expected to increase interest rates before the Bank of England (BoE) and with focus shifting back to the UK’s economic performance, the Pound fell to 1.57 before the weekend.
Sterling’s uptrend against the ‘Greenback’ was stymied in spite of Friday’s University of Michigan Confidence gauge showing an unforeseen drop in sentiment.
In the view of strategist John Hardy; ‘We’ve had quite a reaction off the back of the election and, at least in terms of ‘Cable’, we’ve had an overextension. [GBP/USD] is settling into a more neutral zone. If you’re looking for Sterling upside it could be interesting on Euro-Sterling.
In the week ahead, the US Consumer Price Index may trigger serious GBP/USD fluctuations, and if inflation in the world’s largest economy moves further into negative territory (as economists expect to be the case) the Pound could return to 1.58.
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: Dovish BoE Minutes Could Sink Sterling, UK Consumer Price Index Key this Week
Whether or not the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates are able to recoup the losses accrued this week largely depends on the UK’s latest inflation data.
The nation’s Consumer Price Index is due for release on Tuesday and although the BoE recently warned that the UK could enter deflation territory in the near future, economists don’t expect it to have happened in April.
The Consumer Price Index is forecast to print at 0.4% on the month and hold at 0.0% on the year. The core CPI (which strips out volatile measures like fuel and food) is projected to come in at 1.0% year-on-year, unchanged from the figure recorded in March.
If these estimations prove false and the non-core figure prints negatively, the Pound will come under pressure. Conversely, a stronger acceleration in consumer prices would be Sterling-supportive.
Investors with an interest in the GBP/EUR, GBP/USD currency pairs will also be looking to the minutes from the latest Bank of England policy meeting for guidance. Given the dovish tone to the central bank’s recent inflation report, it is likely that the minutes may contain further warnings regarding the detrimental impact of a strong domestic currency and hint at slow and gradual adjustments to borrowing costs.
However, if the minutes show that one or more members of the Monetary Policy Committee (MPC) voted in favour of interest rates being increased at the last gathering, it would bring forward rate-hike expectations and bolster the Pound in the process.
The UK’s Retail Sales numbers will also impact Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) trading, albeit to a lesser extent than the CPI data or BoE minutes.
On Sunday the Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7272, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5720, the US Dollar to Pound Sterling (USD/GBP) exchange rate was trading in the region of 0.6361, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3724