Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Trend Narrowly despite UK GDP Meeting Estimates
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a tight range on Friday afternoon.
Although British economic data produced mostly positive results on Friday, the Pound declined versus the majority of its most traded currency rivals. The depreciation can be linked to mounting speculation that the Bank of England (BoE) will delay a benchmark rate hike for some time, and hikes will come in small increments. Whilst third-quarter British Gross Domestic Product (GDP) met with expectations of 0.5% growth on the quarter and 2.3% on the year, the data still highlights a slowdown. ‘Growth in the UK continues to be unbalanced,’ said Scott Bowman, an economist at Capital Economics Ltd. in London. ‘While we think that the slowdown in growth in the third quarter will be temporary — indeed business surveys have bounced back in October — any acceleration will probably continue to be led by domestic demand and the service sector.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4228.
On the other side of the Channel, the shared currency eked out gains versus most of its currency rivals on Friday morning despite a mixed-bag of domestic data results. October’s German Import Prices came in below projections on both a monthly and an annual basis. The preliminary estimate for November’s Spanish Inflation Rate bettered predictions on both a monthly and yearly basis. Eurozone Business Confidence came in below expectations in November, but the final reading for November’s Consumer Confidence came in at -5.9% which eclipsed predictions of -7.7. November’s Eurozone Industrial Sentiment contracted beyond the market consensus, but Economic Sentiment in the same month advanced beyond the median market forecast.
Pound Sterling to US Dollar (GBP/USD) Conversion Rate Predicted to Decline on Rising December Fed Bets
The Pound Sterling to US Dollar (GBP/USD) exchange rate declined by around -0.4% on Friday afternoon.
Although British Gross Domestic Product met with estimates, November’s Consumer Confidence failed to do so. Having been expected to hold at 2, Consumer Confidence actually dropped to a six-month low of 1. ‘Despite the good news agenda of rock-bottom inflation, falling fuel prices and higher wage growth boosting spending power, confidence appears to be depressed by a combination of wider economic, political and social events,’ stated Joe Staton, head of market dynamics at GfK.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5045.
Although Federal Reserve officials have shown divergent opinions with regards to the timing of a benchmark interest rate hike, the vast majority of traders (over 70%) expect the Federal Open Market Committee (FOMC) to vote for tighter policy in December. This has supported demand for the US asset despite a complete absence of domestic data to provoke changes. ‘Assuming that we continue to get good data on the economy, continue to get signs that we are moving closer to achieving our goals and gaining confidence getting back to 2% inflation… If that continues to happen there’s a strong case to be made in December to raise rates,’ stated San Francisco Fed President John Williams.
Pound Sterling to Euro, US Dollar Exchange Rate Forecast: GBP Weakness Predicted
Given the absence of further domestic data to affect changes for the Pound Sterling to Euro (GBP/EUR) and US Dollar (GBP/USD) conversion rates, the British asset is predicted to hold a weak position. However, the coming week should see heightened volatility with several influential ecostats due for publication.
In terms of British data, November’s Services PMI, Construction PMI and the BOE Financial Stability Report and Bank Stress-Test Result will be of significance for those invested in the UK asset.
For those invested in the common currency; German Consumer Prices, German Unemployment and Eurozone Inflation will be of interest. However, Euro trade will be dominated by the outcome of the European Central Bank (ECB) interest rate decision given that many experts predict some form of policy easing.
There will also be a number of influential US data publications next week. November’s ISM Manufacturing/Non-Manufacturing Composite, Unemployment Rate and Change in Non-Farm Payrolls will all be likely to provoke significant USD volatility. A speech from Federal Reserve Chairwoman Janet Yellen as she appears before the Congressional Joint Economic Committee will also be of interest.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.4172 to 1.4247 during Friday’s European session.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.5027 to 1.5109.