US Dollar Softens After Important Retail Data Shows Only Minor Improvement
The US Dollar continues its bearish performance after today’s key data releases performed worse-than-expected. While failing to meet forecasts, both the University of Michigan Confidence index and the Advance Retail Sales figures posted a slight rise on previous figures. The US Dollar is currently down -0.3% against Pound Sterling and -0.4% against the Euro.
UK interest rates are still at a record low 0.50% after yesterday’s Bank of England decision not to change monetary policy, with the rate of asset purchasing remaining at £375 billion. Some traders had hoped that the increasing likelihood of an interest rate hike by the Federal Reserve would motivate the Bank of England to pre-emptively match their decision.
Instead, citing a continual decline in oil prices and a sluggish pace of wage growth, the Monetary Policy Committee (MPC) voted 8-1 to hold interest rates. The only hawk on the board, Ian McCafferty, voted for the fifth consecutive meeting for a 0.25% increase in the rate.
According to chief economist at the British Chambers of Commerce David Kern: ‘With inflation not expected to start edging up until next year, or reach target until well into 2017, there is simply no need for the Bank to consider changing tack.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate News: German CPI Shows Steady Inflation
Figures released during today’s London session have shown that German inflation continues to rise at a steady pace, although there has been no acceleration in the rate of growth. The core price index remained at 0.4% year-on-year, while the harmonised index held level at 0.3%. The Whole Sale Price Index also moved towards positive territory, rising from -0.4% to -0.2% month-on-month (MoM) and from -1.6% to -1.1% year-on-year (YoY).
The news has allowed the Euro to make significant gains on several major currencies, advancing 0.3% against the South African Rand (ZAR) and the Japanese Yen (JPY) and 0.5% against the Australian Dollar (AUD).
The GBP/EUR exchange rate is currently trading down -0.1% in the region of 1.3833.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Trending Up as Positive China Data Lessens Fears of Global Weakness
With the major data releases preceding next week’s Federal Reserve interest rate decision mostly having printed positively, investors are almost certain that a rate hike is on the cards. Fed Chair Janet Yellen has already signalled that only an event which shakes her confidence in the economy could deter her from pushing for a rise. While yesterday’s employment data showed Initial Jobless Claims rose 12k more than forecast and Continuing Claims increased by 88k, the figures haven’t had a significant impact upon trader expectations.
Federal Open Market Committee (FOMC) confidence will have been buoyed by generally positive releases from China, showing that Aggregate Financing more than doubled to 1020b in November, while New Yuan Loans increased from 513.6b to 708.9b. The strength of the world economy will play a large role in influencing the FOMC decision, so positive news from China will soften concerns.
The GBP/USD exchange rate is currently trending in the region of 1.5163.
Pound Sterling to Euro, US Dollar Exchange Rate Forecast: UK and US Inflation Data due Next Week
Tuesday will be an important day for GBP/EUR and GBP/USD exchange rates, with UK and US CPIs and the Eurozone ZEW Economic Sentiment Survey due for publication. With trader anticipation so high, more positive news for the US will push the ‘Buck’ (USD) down further, with the potential for Pound Sterling to make strong advances if the UK data shows an increase in the pace of inflation.
The GBP/EUR exchange rate is currently trending between 1.3810 and 1.3863.
The GBP/USD exchange rate is currently trading between 1.5129 and 1.5168.