The Pound Sterling to Euro (GBP/EUR) exchange rate remained in a narrow range in Thursday’s trading ahead of the Bank of England’s (BoE) interest rate decision, while the Pound Sterling to US Dollar (GBP/USD) exchange rate sank after the Federal Reserve’s meeting minute release.
The minutes showed that the Federal Open Market Committee (FOMC) were split on the prospect of a rate hike in June, an event the market took to be hawkish.
The FOMC report read: ‘Several participants judged that the economic data and outlook were likely to warrant beginning normalisation at the June meeting.’
Earlier… The Pound Sterling to Euro (GBP/EUR) exchange rate remained bullish as Wednesday’s European trading continued, while the Pound Sterling to US Dollar (GBP/USD) exchange rate jumped as Wall Street trading began and investors anticipated the Federal Reserves meeting minute release.
Earlier… The Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates advanced in the first half of Wednesday’s European session after German Factory Orders contracted on the year by -1.3% in February.
The Pound Sterling to Euro (GBP/EUR) exchange rate began Tuesday’s session trading higher while the Pound Sterling to US Dollar (GBP/USD) exchange rate fell after the Bank of England’s (BoE) Financial Policy Committee report.
The FPC minutes discussed the situation in Greece, saying: ‘The realisation of any of the global risks that the Committee had identified could trigger abrupt shifts in global risk appetite. This might, in turn, lead to a sudden reappraisal of underlying vulnerabilities in highly indebted economies, or sharp adjustments in financial markets.’
Meanwhile, Rabobank have forecast BoE interest rate hikes mid 2016.
Rabobank commented: ‘The BoE has stated that long-term inflation expectations have remained stable and given that there is little sign that the UK consumer is adopting a deflationary mindset we expect that the next policy move from the BoE will be a hike.’
‘Although we have been calling for a move in February 2016, the risk that UK CPI stays low for longer implies that steady rates could be in place until next year.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Trading Higher as UK PMI’s Jump
The Euro to Pound Sterling (EUR/GBP) exchange rate is likely to remain sensitive to negotiations between Greece and its creditors as investors’ price in the possibility of a ‘Grexit’, especially as the BoE has warned it’s a potential factor to damage the UK economy.
However, Greece has vowed to meet its International Monetary Fund (IMF) repayment this week ahead of the meeting between the Greek government and Russia. Many industry experts have suggested that the meeting could be a cover for financial aid discussions in which Greece could feasibly turn to the nation if Eurozone talks don’t end well.
Eurozone data also printed unfavourably on Tuesday when Markit’s Services Purchasing Managers Index (PMI) slipped from the initial 54.3 flash forecast to 54.2. Additionally, The Eurozone Composite PMI fell from 54.1 to 54.0.
Markit’s chief economist Chris Williamson stated: ‘Whether the Eurozone economy has achieved escape velocity to enjoy a return to a strong and sustainable recovery remains uncertain, but the region is certainly seeing its best growth momentum since 2011.’
In addition, the Sentix Eurozone Investor Confidence index rose from 18.6 to 20.0 in April, a shade lower than the 20.8 forecast.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Climbs on Weak US Data
Meanwhile, the US Dollar to Pound Sterling (USD/GBP) exchange rate had an interesting ride over the Easter weekend while UK markets were closed. The British currency jumped against the ‘Buck’ when the US Change in Non-Farm Payrolls figure reached 126K in March after forecasts for a substantially higher 245K.
Additionally, US Change in Household Employment came in at only 34 in March instead of the 245 prediction.
Monday wasn’t much more positive for the US economy when the ISM Non-Manufacturing Composite index slipped from 56.9 to 56.5 in March.
Federal Reserve official William Dudley also suggested that the timeframe for interest rate hikes was unclear after a string of disappointing US data.
Dudley said: ‘The timing of normalisation will be data dependent and remains uncertain because the future evolution of the economy cannot be fully anticipated.’
Tuesday’s a relatively quiet day for US data with only the US Consumer Credit figure due for release. Furthermore, Federal Reserve Minneapolis President Narayana Kocherlakota is scheduled to speak but his dovish views aren’t likely to help the US Dollar to Pound Sterling (USD/GBP) exchange rate recover.
Pound Sterling (GBP) Exchange Rate Forecast: GBP/EUR, GBP/USD
The Pound Sterling could be in for an exciting day of trading after upbeat UK data bolstered the GBP/EUR exchange rate significantly. Markit’s UK Services Purchasing Managers Index hit 58.9 in March from 56.7 the previous month, shattering economists’ forecasts to climb to only 58.01.
Furthermore, the UK Composite PMI reached its highest since August 2014 at 58.7 in March from 57.0.
— Chris Williamson (@WilliamsonChris) April 7, 2015
However, the Pound Sterling to US Dollar (GBP/USD) exchange rate sank on Tuesday when the Bank of England’s (BoE) Financial Policy Committee released its record of the March meeting.
The central bank determined that the UK’s extensive current account deficit could create negative market sentiment and policymakers will therefore be keeping it under close review.
Moreover, the BoE statement suggested that the ongoing negotiations between Greece and its creditors could have significant repercussions if they continue to be lethargic. The fallout of Greece leaving the Eurozone was unlikely to affect UK banks in a major way, but the ongoing delays could cause major negative effects.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading at 1.4898; the Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the region of 1.3705.