The Pound Sterling to Euro (GBP/EUR), Pound Sterling to New Zealand Dollar (GBP/NZD), Pound Sterling to Australian Dollar (GBP/AUD) and Pound Sterling to US Dollar (GBP/USD) exchange rates all gained as the British currency strengthened amid a crumbling Eurozone and weaker economic prospects.
Greek Prime Minister Alexis Tsipras used his trip to Russia to call for EU unity. However, investors in the EUR exchange rate are concerned that Greece could be approaching Russia for financial aid.
Tsipras stated: ‘As all of you are aware, we are at the moment at the centre if a storm of a whirlpool, but we live near the sea so we’re not scared of the sea. We are ready to go to new seas to reach new safe ports.’
‘The problem we are facing is deeply rooted in the process I have described. The EU should pursue its own path. The EU should go back to its initial principles of solidarity and social justice. Ensuring strict economic measures will lead us nowhere. The so-called problem of Greece is the problem of the whole European Union.’
Eurogroup talks in Luxembourg fell apart on Thursday when the topic of Greece came up; with no deal in sight, it’s hard to think negotiations will be suddenly concluded in the next week or so.
Greek PM Tsipras: Euro Summit On Greece Is Positive Development — RTRS -Those Betting On Crisis Will Be Proven Wrong
— Live Squawk (@livesquawk) June 19, 2015
Earlier… The Pound Sterling to Euro (GBP/EUR), Pound Sterling to US Dollar (GBP/USD), Pound Sterling to New Zealand Dollar (GBP/NZD) and Pound Sterling to Australian Dollar (GBP/AUD) exchange rates all jumped in Wednesday’s European trading after upbeat UK wage growth and labour sector data hit the market.
GBP/USD, GBP/EUR Climb as Fed Rate Hike Bets Weaken, New Zealand GDP Drops – GBP/NZD, GBP/AUD Soften as Oceanic Currencies Recover
The Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Euro (GBP/EUR) exchange rates were trending higher in Thursday’s European session as investors hoping for a Greek deal or a Federal Reserve interest rate hike were both disappointed. Meanwhile, the Pound Sterling to New Zealand Dollar (GBP/NZD) and Pound Sterling to Australian Dollar (GBP/AUD) exchange rates were both softer as the Oceanic currencies regained some strength.
The New Zealand Dollar (NZD) was offered little support when the nation’s economy showed a sharp drop in Gross Domestic Product (GDP) from 3.5% to 2.6% in the first quarter on the year. Economists had expected a lesser fall to 3.1%.
Meanwhile, Chairwoman of the US Federal Reserve Janet Yellen dampened investors bets for a Fed rate hike in the near future as the central bank downgraded 2015 growth forecasts.
Industry expert Kathy Lien commented: ‘Expectations were high going into the monetary policy announcement and unfortunately for Dollar bulls hoping for a sharp upside breakout, Janet Yellen failed to deliver. Investors were hoping for a clear road map for lift off but she did not even mention that the chance of a September rate hike has strengthened.’
Pound Sterling (GBP) Exchange Rate (GBP/AUD, GBP/NZD, GBP/USD, GBP/EUR) Jumps on Upbeat Average Weekly Earnings
The Pound Sterling (GBP) exchange rate was offered some huge support (most notably surging 1% against the Australian Dollar [AUD] and New Zealand Dollar [NZD]), when UK labour market data printed favourably.
The UK’s Unemployment rate stat remained stable at 5.5% in April as forecast, while Average Weekly Earnings both including and excluding bonuses jumped from 2.3% to 2.7% in April. The leap was the strongest wage growth since February 2009.
The Office for National Statistics stated: ‘Higher three month average growth rates were recorded, for both regular pay and total pay, across a wide range of industries in the private sector compared with January to March 2015.’
However, the Bank of England’s (BoE) meeting minutes failed to reveal a policymaker divergence had taken place in June and instead showed that all members of the Monetary Policy Committee (MPC) had voted unanimously to keep rates on hold.
Moreover, the BoE noted that an increase in interest rates would be driven by inflation and not by other central bank (namely the US Federal Reserve) activity.
Markit economist Chris Williamson commented: ‘The key take-away is that, if the pace of economic growth revives, as widely expected, the recent upturn in pay takes away the main remaining argument to hold off with raising interest rates, and pressure to tighten policy looks set to build significantly as we move into the second half of the year.’
Australian Dollar (AUD) Exchange Rate Falls on Iron Ore Forecasts
The Australian Dollar (AUD) exchange rate weakened significantly in the market as iron ore futures dipped. Iron ore is Australia’s largest commodity and therefore any price fluctuations can bode badly for the Australian Dollar (AUD) exchange rate.
Currency strategist Joe Capurso commented: ‘Iron ore futures have been weaker today in China and that’s the main reason for the Australian Dollar losing ground.’
Additionally, the prospect of a Federal Reserve interest rate hike in the near future has done little favour for either of the Oceanic currencies and when the Fed does begin tightening, it’s likely the Australian and New Zealand Dollars will have a rough time in the market.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is trending at 0.4877.
New Zealand Dollar (NZD) Exchange Rate Forecast: NZ Gross Domestic Product (GDP) Data Ahead
Speaking of which, the New Zealand Dollar (NZD) is presently trending in the region of a five-year low versus the US Dollar (USD) as the market awaits New Zealand Gross Domestic Product (GDP) data and the Federal Open Market Committee (FOMC) interest rate decision. The NZD/USD exchange rate slipped to 0.6934, lower than the five-year low of 0.6942 which was breached on June 12th.
New Zealand’s GDP stat is expected to slip from 3.5% to 3.1% in the first quarter on the year, with the Q-o-Q figure forecast to come in at 0.6%.
The New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate is trending at 0.4404.
US Dollar (USD) Exchange Rate Forecast for Major Market Movement on FOMC Interest Rate Decision and Follow-Up Yellen Statements
One of the main highlights of the week, particularly for the US Dollar (USD) exchange rate, is sure to be the FOMC interest rate decision and routine follow-up statements. Any remarks from the Federal Reserve (especially from Fed Chair Janet Yellen) are being closely analysed as investors attempt to forecast an interest rate timeline.
Industry expert Richard Clardia commented: ‘Right now, markets are pricing a less than 30% probability the Fed hikes in September, but a greater than 60% probability they hike by December. I suspect Yellen would not be unhappy if, after her press conference, the markets price in a higher probability of a September.’
Thursday will be another influential day, with the release of the US Consumer Price Index (CPI). A rise in inflation could spur speculation that the Fed is likely to hike interest rates in the near future.
The US Dollar to Pound Sterling (USD/GBP) exchange rate is trending at 0.6354.
Euro (EUR) Exchange Rate Forecast: Greek Default on the Cards after Greece’s PM Alexis Tsipras Hits Out
Yesterday was an interesting day for the Euro (EUR) exchange rate as Greek Prime Minister Alexis Tsipras accused the International Montary Fund (IMF) of having a ‘criminal responsibility’ in Greece’s current situation.
The Bank of Greece has also asked the Greek government to make a deal or risk becoming ‘a poor country in the European South.’
The Bank of Greece stated: ‘Failure to reach an agreement would… mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the Euro area and – most likely – from the European Union.’
‘A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability. An exit from the Euro would only compound the already adverse environment, as the ensuring accurate exchange rate crisis would send inflation soaring.’
— EU Council TV News (@EUCouncilTVNews) June 18, 2015
The Euro to Pound Sterling (EUR/GBP) exchange rate is trending at 0.7164.