Pound Softer against US Dollar and Euro Despite Trade Data
The Pound continued trending in a softer position against both the Euro and US Dollar on Tuesday despite a report showing that Britain’s trade deficit narrowed by more-than-expected in April.
As stated by Reuters; ‘The Office for National Statistics said Britain’s total trade deficit narrowed to 1.202 billion Pounds in April from an upwardly revised 3.093 billion Pounds in March, its lowest since March 2014. The deficit in goods alone narrowed to 8.561 billion Pounds from 10.705 billion Pounds, also the lowest since March last year, compared with economists’ forecasts for it to drop to 9.9 billion Pounds.’
While this news was Pound-supportive, Sterling was struggling against the Euro in the face of the latest developments in the Greek bailout negotiations.
The Pound also pared previous gains against the US Dollar as reports that the US President is unhappy with the strength of the domestic currency were declared unfounded.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3533
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5294
GBP/EUR Lower after German Data, GBP/USD Stabilises after Friday’s Decline
On Monday the Pound Sterling to Euro (GBP/EUR) exchange rate shed -0.4% in reaction to positive German Industrial Production and Trade Balance data.
While the pace of industrial output increased by considerably more-than-anticipated on both a monthly and annual basis, a surprise surge in German exports led to a widening in the nation’s trade surplus.
Meanwhile, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in a narrow range after sliding on Friday as a result of an impressive US jobs gain.
Demand for the Pound also eased as the Confederation of British Industry (CBI) cut its growth projections for both 2015 and 2016.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3669
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5275
While the Pound Sterling to Euro (GBP/EUR) exchange rate strengthened to 1.37 on Friday, the Pound Sterling to US Dollar (GBP/USD) exchange rate ended the week lower as a result of the stronger-than-expected US employment gain.
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate News: BoE Inflation Expectations Rise, US Employment Improves, German Growth Forecast Increased
Friday was a day of fairly major news, and both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates experienced volatility as a result of developments in Europe and across the pond.
Early in the European session the Euro advanced on peers like the Pound and ‘Greenback’ in response to the news that Greece had deferred payment to the International Monetary Fund (IMF) rather than defaulted.
All week bets that the nation would default and increase the odds of a ‘Grexit’ weighed on the common currency, so there was a collective sigh of relief when the worst didn’t happen.
The Pound Sterling to Euro (GBP/EUR) exchange rate fell to a low of 1.3630
The Hellenic nation continues to negotiate with its creditors and has yet to secure the emergency bailout funds it desperately needs, but the fact that it won’t be expelled from the currency bloc due to a missed payment (at least until the end of the month) was taken to be Euro-supportive.
Germany’s unexpectedly upbeat Factory Orders data and a positive revision to the nation’s growth forecasts by Bundesbank also helped drive the Pound Sterling to Euro (GBP/EUR) exchange rate to a low of 1.3582.
Economist Holger Schmieding said of Germany; ‘The engine of core Europe keeps humming nicely. Germany is starting to reap the benefits of the rebound in growth across the Eurozone.’
However, the Pound later recovered losses against its European peer and advanced back above 1.37 following the publication of the Bank of England’s Inflation Expectation Report.
The report showed that expectations for consumer prices in the year ahead advanced from an over 13-year low of 1.9% to 2.2%. The percentage of respondents expecting an interest rate hike in the next 12 months also increased to 38% from 36%.
The Pound Sterling to US Dollar (GBP/USD) exchange rate fell to a low of 1.5189
While the Pound performed well against the Euro at the close of the week, the British currency struggled against a broadly-strengthening US Dollar.
The US Dollar advanced on the majority of its peers after the US was shown to have added a greater-than-forecast number of positions in May.
The US economy added 280,000 positions – significantly more than the 226,000 forecast – and the odds of the Fed increasing interest rates in September rose accordingly.
It wasn’t all good news however, as April’s jobs gain was negatively revised, leading to an increase in the US unemployment rate.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast – Greek Situation Remains Uncertain, Eurozone GDP/Sentiment and German Trade Data to Impact Euro this Week
Initially the Euro rallied in response to the news that Greece deferred payment to the IMF, rather than defaulting, but as investors began to speculate that the Hellenic nation will default on the much larger repayment due at the end of June, the common currency lost ground.
Reports that the Greek PM and Russian President have been engaging in discussions also weighed on the Euro.
Next week EUR/GBP movement could be caused by the Eurozone’s second estimate first quarter GDP, Sentix Investor Confidence Gauge, German Industrial Production and Trade Balance numbers and any developments in the discussions between Greece and its creditors.
According to Bloomberg; ‘representatives of the creditor institutions and the Greek government prepare to reconvene for talks in Brussels on Monday. Greek Prime Minister Alexis Tsipras is then due to attend a meeting of European Union and Latin American leaders on June 10-11, when Merkel and French President Francois Hollande will also be present.’
The Euro to Pound Sterling (EUR/GBP) exchange rate achieved a high of 0.7336
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast – US Advance Retail Sales and University of Michigan Confidence Index to Trigger ‘Cable’ Movement
Expectations that the Federal Reserve intends to increase interest rates in September will keep the US Dollar bullish next week as long as US reports continue to print well.
The ones most likely to impact rate hike projections are the advance sales numbers and the University of Michigan Confidence Index.
A disappointing consumer spending figure would weigh on the ‘Greenback’ and could help the Pound recoup this week’s losses.
On Saturday the Pound Sterling to US Dollar (GBP/USD) exchange rate hit a high of 1.5335
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: UK Industrial/Manufacturing Production and GDP Estimate Ahead
Both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates could fluctuate next week as a result of UK data releases.
The nation is set to publish Manufacturing and Industrial Production figures, the National Institute of Economic and Social Research (NIESR) GDP estimate and a Construction Output report.
Signs of improved output would be Pound supportive, but any indications that the pace of growth failed to increase in the second quarter may push the British currency lower.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7279, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5269, the US Dollar to Pound Sterling (USD/GBP) exchange rate was trading in the region of 0.6549, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3737