Pound Sterling Advances on Euro, US Dollar after UK CPI
After the UK’s annual Consumer Price Index printed at 0.1%, rather than holding at 0.0% as expected, the Pound broadly advanced.
Although the rate of inflation is still very far from the Bank of England’s 2% target, the fact that consumer price gains are gradually edging higher was well received by investors.
The core measure accelerated to 1.2%.
If inflation should continue to rise in the months ahead it would support the case in favour of UK interest rates being revised around the turn of the year.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.4195 after failing to hold the 1.42 level.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.5668
GBP/USD Exchange Rate Trims Gains before UK Consumer Price Index
Before the close of the European session the GBP/USD exchange rate reversed prior gains to fall 0.3% on the day’s opening levels.
One of the day’s few US ecostats, the NAHB Housing Market Index, showed improvement by printing at 61 in August, up from 60 in July.
Tomorrow we can expect to see considerable Pound Sterling to Euro and Pound Sterling to US Dollar exchange rate movement as the UK publishes its inflation report.
The US is also set to release Building Permits and Housing Starts numbers.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5597
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4084
Eurozone Trade Surplus Widens; GBP/EUR Conversion Rate Down from Day’s Highs
As local trading continued, the Pound Sterling to Euro (GBP/EUR) exchange rate pared gains as the Eurozone’s trade balance report showed that the region’s trade surplus widened by more-than-expected.
The recent depreciation in the common currency contributed to the region’s surplus widening from 18.8 billion Euros in May to 26.4 billion Euros in June.
The surplus was the widest for six months and largely due to a softer Euro helping export levels exceed import levels in the period.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4081.
If tomorrow’s UK inflation report shows a surprising pick-up in consumer price gains, the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates could rally, potentially moving back towards the highest levels of the year so far.
GBP/EUR, GBP/USD Exchange Rate News: BoE Comments Support Pound Sterling, Euro Lower on GDP Miss
The Pound was able to advance on the majority of its currency counterparts on Monday, with the GBP/EUR and GBP/USD conversion rates jumping from the lows recorded off the back of last week’s disappointing UK jobs data.
The GBP/EUR exchange rate hit a high of 1.4153 while the GBP/USD currency pair achieved 1.5688 as investors responded to comments issued by Bank of England (BoE) policymaker Kristin Forbes.
Although only one member of the Monetary Policy Committee (MPC) voted in favour of increasing borrowing costs at the last gathering, Forbes’ remarks indicate that other policymakers also feel it’s nearing the time when UK interest rates need to be higher.
In reference to the timeline for adjusting borrowing costs, Forbes observed; ‘Waiting too long would risk undermining the recovery – especially if interest rates then need to be increased faster than the gradual path which we expect.’
The remarks helped to counteract the impact of a disappointing Rightmove House Price report. The housing data revealed a -0.8% decline in property values on the month.
However, as European trading progressed the Euro began to recover some of the losses occasioned by last week’s below-forecast growth reports for the Eurozone and its largest economies as investors instead focused on the news that the third Greek bailout was approved by European parliaments.
The Euro to Pound Sterling (EUR/GBP) exchange rate fell to a low of 0.7063
US Dollar to Pound Sterling (USD/GBP) Exchange Rate Forecast – Chinese Yuan Devaluation Weighs on US Rate Hike Bets and ‘Greenback’
Last Friday the US published mixed economic data, with the nation’s industrial production figures exceeding forecasts but the University of Michigan Confidence index showing a dip in sentiment.
As the Fed has implied that adjustments to fiscal policy will be data dependent, the US Dollar fluctuated modestly after the reports were published.
Concerns that the recent depreciation of the Chinese Yuan might affect the policy path taken by the Fed prevented the ‘Greenback’ from breaking out of its fairly narrow trading range with the Pound, but if today’s US NAHB Housing Market Index prints well the US Dollar could edge higher.
The US Dollar to Pound Sterling (USD/GBP) exchange rate hit a low of 0.6390
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: UK CPI, ECB Repayment and FOMC Minutes Ahead
As stated above, tomorrow’s UK Consumer Price Index could prove crucial in dictating the direction taken by the Pound Sterling to Euro and Pound Sterling to US Dollar exchange rates.
The rate of inflation printed at 0.0% on both the month and year in June. Investors are expecting an annual figure of 0.0% in July but a month-on-month decline of -0.3%.
While a return to deflation would hardly be surprising given the recent performance of key commodities like crude oil, a slumping CPI would still weigh on the Pound and potentially see the British currency give up the gains recorded at the beginning of this week.
However, an unexpectedly positive figure could push the GBP/EUR pairing above 1.42 and see the GBP/USD pairing advance beyond 1.57.
Investors with an interest in the Pound Sterling to Euro exchange rate will also be focusing on Greece and the nation’s upcoming debt repayment to the European Central Bank (ECB). Meanwhile, demand for the Pound Sterling to US Dollar currency pair is likely to be affected by the US Consumer Price Index and the publication of minutes from the last Federal Open Market Committee (FOMC) policy gathering.
Hawkish minutes would be ‘Greenback’ supportive, but cautious Fed commentary would help boost the GBP/USD pairing.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7093, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5648, the US Dollar to Pound Sterling (USD/GBP) exchange rate was trading in the region of 0.6390, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4086