GBP/EUR Trending Higher, GBP/USD Exchange Rate Declines
Although US Federal Reserve interest rate bets remain pushed back in light of the recent run of poor US reports, the Pound Sterling to US Dollar (GBP/USD) exchange rate was pressured lower on Tuesday. With no pertinent data releases related to either the UK or US to be aware of today, further ‘Cable’ movement may be limited ahead of the publication of minutes from the Bank of England’s (BoE) latest policy meeting.
Meanwhile, the GBP/EUR exchange rate stormed higher as investors digested disappointing Eurozone construction output numbers and the Greek negotiations provided yet more cause for concern.
Today’s German ZEW economic sentiment/current situation surveys could lend the Euro support if they show increased confidence.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3938
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.4875
Pound Sterling to Euro (GBP/EUR) Exchange Rate Gains after Eurozone Data Flops
On Monday the Pound gained by 0.35% against the Euro following the release of concerning construction output figures for the Eurozone.
Construction Output was shown to have fallen by 1.8% on the month in February, following a negatively revised increase of 1.6% in January.
This resulted in an annual figure of -3.7%.
German Producer Price data also fell short, and the Euro softened accordingly.
That being said, German assurances that the Eurozone’s largest economy will do what it can to keep Greece in the currency bloc have gone some way to reducing ‘Grexit’ fears and limited the common currency’s decline.
The Pound was little changed following the publication of the UK’s Rightmove House Price report. House prices were up 1.6% on the month in April but growth softened from 5.4% to 4.7% on the year.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3888 while the Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.4933.
At the close of the week the Pound Sterling to Euro (GBP/EUR) exchange rate drifted back below the 1.39 level while the Pound Sterling to US Dollar (GBP/USD) exchange rate failed to hold at 1.50.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Falls Below 1.39 Despite UK Jobs Data
The Pound Sterling to Euro (GBP/EUR) exchange rate had surged earlier on Friday as the UK published unexpectedly upbeat employment figures.
Economists had expected the unemployment rate to ease from 5.7% to 5.6%, but they didn’t envisage the 240,000 jobs gain recorded in the three months through February.
As the report was the latest in a string of UK ecostats to print above anticipated levels, it upped the odds of the Bank of England (BoE) revising borrowing costs in either the final three months of this year or the first three months of next. The Pound was buoyed as a result and advanced on both the US Dollar and Euro.
Sterling also derived support from comments issued by the International Monetary Fund’s Christine Lagarde on the subject of the UK’s economic recovery.
During a gathering of global policymakers, Lagarde noted; ‘When we look at the comparative growth rates delivered by various countries in Europe, it’s obvious that what’s happening in the UK has actually worked.’
However, the Euro fought back and recovered ground despite the lack of concrete progression in the Greek bailout negotiations.
The Financial Times said this of the issues faced by Syriza, Greece’s fledgling government; ‘More financial aid for Greece will require detailed commitments on fiscal discipline and economic reform, the polar opposite of the anti-establishment, anti-austerity platform that catapulted Mr Tsipras to power. Such a deal would prevent Greece from defaulting and tumbling out of the Eurozone, at least in the near term. Pro-EU opposition parties would back Mr Tsipras in pushing it through parliament.’
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: US Confidence Index Climbs
Although the Pound Sterling to US Dollar (GBP/USD) exchange rate jumped above 1.50 after the UK’s jobs data was released, Sterling pared gains before the close of trading as the US University of Michigan Confidence Index showed improvement.
The reading of 95.9 was the second highest on record, and industry expert Michelle Meyer said the result ‘is encouraging given that the March payroll report was a little bit weaker and some of the other data around the consumer has been softer. The fact that consumers are feeling better hopefully will translate into greater expenditures over time and that’s been a missing link to the economic recovery this year.’
The US core Consumer Price Index also rose, although the non-core measure eased into deflation territory.
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast – BoE Minutes, Greek Negotiations and US Durable Goods Orders in Focus
In the week ahead several factors will be driving Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rate movement.
In terms of UK news, the Bank of England (BoE) meeting minutes will be key. The last batch of minutes were fairly dovish, in that they warned that the strength of the Pound was worsening the current deflationary climate, and another set of cautionary comments would pressure Sterling lower.
Although UK reports have been fairly solid in recent weeks, the BoE may choose to stand on the sidelines ahead of the UK general election.
However, if the minutes are hawkish and indicate that the first increase in interest rates might occur at the end of this year, we may see the Pound rally and push higher against peers like the Euro and US Dollar.
The ongoing negotiations between Greece and its creditors will be the main cause of Euro volatility, although investors will also be taking an interest in the German ZEW economic sentiment surveys and Services/Manufacturing/Composite PMIs for the Eurozone and its largest economies.
The week’s major US report is the nation’s Durable Goods Orders figures. After a sharp decline in February economists have predicted a rebound in March. If this rebound doesn’t occur, and the data adds to the case in favour of the Federal Reserve leaving interest rates on hold, the Pound may climb back above the 1.50 level before the end of the week.
On Saturday the Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3839 and the Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.4959