BoE Minutes Inconclusive on Q1 2016 Rate Rise, Pound Steady against Euro, US Dollar
Although the minutes from the Bank of England’s (BoE) latest policy meeting inferred that global economic headwinds hadn’t materially affected their projections for fiscal policy, the central bank didn’t offer any more concrete hints that interest rates are still on course to be revised in the first quarter of 2016.
The minutes also showed a 8-1 division among the Monetary Policy Committee (MPC) on the subject of whether interest rates should be raised immediately or not – unchanged from the previous month.
The Pound Sterling to Euro and US Dollar exchange rates held earlier gains after the minutes were published but failed to see much movement.
The GBP/EUR exchange rate was trending in the region of 1.3756
The GBP/USD exchange rate was trending in the region of 1.5393
UK GDP Reported at 0.5%, Down from 0.7%: British Pound Little Changed
The British Pound was little changed against both the Euro (GBP/EUR) and US Dollar (GBP/USD) following the publication of the UK’s GDP estimate for the three months through August.
NIESR estimated that the UK economy expanded by 0.5% in the three month period, down from the expansion of 0.6% recorded over the previous three months.
NIESR said of the result; ‘Despite the slight softening, growth remains close to the estimated long run potential of the economy, but below the average rate of growth (0.7% per quarter) observed since the start of 2013.’
The Pound Sterling to Euro exchange rate was trading in the region of 1.3779
The Pound Sterling to US Dollar exchange rate was trading in the region of 1.5389
Although both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates gained at the beginning of the week, a dovish set of meeting minutes from the Bank of England (BoE) could send both pairings trending lower tomorrow.
The Pound may also experience movement as a result of today’s UK GDP estimate from the National Institute of Economic and Social Research (NIESR).
Pound Sterling to Euro Exchange Rate News: GBP/EUR, GBP/USD Rally on M&A Developments
The British Pound got the week off to a positive start by climbing against the Euro (GBP/EUR) and moving away from a four-month low against the US Dollar (GBP/USD).
The currency recorded additional gains on Tuesday as an acquisition deal worth 3.5 billion Pounds galvanised investors.
It was reported that the British insurance firm Amlin is to be taken over by Japanese Company Mitsui Sumitomo Insurance and the size of this acquisition was viewed as a positive for the UK economy.
While buoying the Pound against the Euro and US Dollar, the news also saw the Pound Sterling to Australian Dollar (GBP/AUD) and Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rates remain close to multi-year highs.
Eurozone Q2 GDP Revised but EUR/GBP Conversion Rate Fails to Benefit Amid ECB QE Predictions
The Euro to Pound Sterling (EUR/GBP) exchange rate fell by around 70 pips on Tuesday even as the Eurozone published some better-than-forecast domestic data.
The currency bloc’s second quarter GDP figures printed at 0.4% (QoQ) and 1.5% (YoY), bettering the respective 0.3% and 1.2% predictions.
However, the positive news had comparatively little impact on demand for the Euro as investors chose to focus on the prospect of the European Central Bank (ECB) extending its quantitative easing programme.
Rumours regarding additional stimulus measures being introduced in China also bolstered support for higher-risk assets and weighed on perceived safer currencies like the Euro.
The Euro to Pound Sterling (EUR/GBP) exchange rate fell to a low of 0.7246
US Dollar to Pound Sterling Exchange Rate Forecast – USD/GBP Gains after UK Manufacturing and Industrial Production Flop
US Dollar to Pound Sterling (USD/GBP) exchange rate movement has been driven by UK developments this week with US data in short supply and investors focusing on the upcoming Federal Open Market Committee interest rate announcement.
After falling on Monday and Tuesday, the USD/GBP currency pair recovered losses on Wednesday as UK data disappointed expectations.
Industrial Production in the nation was shown to have fallen by -0.4% in July, month-on-month, rather than climbing the 0.1% expected while Manufacturing Production defied forecasts for a 0.2% increase by slumping -0.8%.
On the year Industrial and Manufacturing Production came in at 0.8% and -0.5% respectively vs. projections for readings of 1.4% and 0.2%.
Office for National Statistics (ONS) economist Joe Grice stated; ‘The biggest single factor in the fall in manufacturing was motor vehicle production, with the summer shutdowns appearing to start earlier than usual, along with anecdotal evidence showing a slowdown in exports. There has also been a fall-back in the manufacture of weapons, following a big rise in June.’
As the data lends credence to the argument in favour of the Bank of England (BoE) leaving interest rates on hold for the foreseeable future – potentially until the third quarter of next year – the Pound softened against peers like the US Dollar and Euro after it was published.
UK trade data also revealed a marked widening in the nation’s deficit.
The US Dollar to Pound Sterling (USD/GBP) exchange rate hit a low of 0.6491
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: Will the BoE Leave Rates on Hold until 2016? Decision and Minutes Ahead
Tomorrow the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates could return to trending around their lowest levels of the year so far if the Bank of England (BoE) meeting minutes are dovish in tone.
Until ‘Black Monday’ investors had expected the BoE to adjust borrowing costs in the first quarter of 2016. However, the Chinese turmoil and its potential impact on the global economy saw this projection revised to the third quarter of next year.
While the Pound is likely to stage an impressive rally if tomorrow’s BoE policy meeting sees the central bank stick to its guns and hint at a rate adjustment taking place around the turn of the year, any indications from the BoE that we can expect lower borrowing costs for longer would drive Sterling down.
News from the Eurozone is in short supply tomorrow but the GBP/USD exchange rate may experience movement as a result of US initial jobless/continuing claims figures and Wholesale Inventories data.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7293, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5356, the US Dollar to Pound Sterling (USD/GBP) exchange rate was trading in the region of 0.6512, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3712