The US Dollar to Pound Sterling (USD/GBP) and US Dollar to Euro (USD/EUR) exchange rates are likely to be in for an interesting end to the week with the release of US Change in Non-Farm Payrolls and Unemployment Rate data, the Bank of England’s (BoE) interest rate decision and 12-Month Inflation Forecast, as well as a deadline for Greece’s International Monetary Fund (IMF) payment on Friday.
UPDATE: The Bank of England (BoE) kept rates on hold in June, leaving investors to wonder whether a divergence of votes occurred.
Friday saw the Euro (EUR) climb despite Greece failing to make its International Monetary Fund (IMF) repayment. Investors are optimistic that an agreement will be made between Greece and its creditors.
Greece Rejects Creditors’ Reform Proposal, EUR (EUR) Exchange Rate Sensitive
— Alexis Tsipras (@tsipras_eu) June 4, 2015
Thursday’s session began with Greece rejecting the reform proposal submitted by creditors, suggesting instead that Greece’s proposal (which it submitted earlier this week) was the only ‘realistic’ one.
Euro (EUR) Exchange Rate Forecast for Movement as Greece Continues to Negotiate, is an IMF Default and Grexit Ahead?
The situation in Greece has been ongoing since the Syriza government was voted into power in January and the Euro (EUR) exchange rate has fluctuated significantly in response. After months of very little progress, things are beginning to heat up as Greece is forecast to run out of money at the start of June.
This Friday, Greece is expected to make a payment to the IMF, just one of its payments due this month and any failure to commit to the payment could see the Euro (EUR) exchange rate drop.
A Greek default could easily lead to a Grexit, which could spark massive Euro (EUR) losses and encourage investors toward safe-haven assets such as the Swiss Franc (CHF), Japanese Yen (JPY) and US Dollar (USD).
European Central Bank (ECB) President Mario Draghi commented on the situation in Greece, saying: ‘The governing council of the ECB wants Greece to stay in the Euro, but there should be a strong agreement.’
When Draghi was questioned about the substance of a strong agreement, Draghi stated that action needed to be taken soon and remain strong in both design and implementation.
Draghi commented on some of the recent proposals, saying: ‘Some of the things discussed in previous months are clearly fiscally unsustainable.’
Thursday will see the release of both Eurozone and German Retail Purchasing Managers Indexes (PMIs) which are likely to have a moderate impact on the Euro (EUR) exchange rate.
The Euro to US Dollar (EUR/USD) exchange rate is trending at 1.1271.
Pound Sterling (GBP) Exchange Rate Forecast for BoE Interest Rate and Inflation Fluctuations
Meanwhile, the Pound Sterling (GBP) exchange rate is forecast for an interesting ride as the week closes with the Bank of England (BoE) due to announce its latest interest rate decision as well as its 12-Month Inflation Forecast.
The meeting minutes from this latest policy meeting could possibly see a policymaker divergence after two members have stated that the decision on whether to increase interest rates was a ‘finely balanced’ one.
The Bank of England (BoE) and Federal Reserve are both currently in close contention to hike interest rates and be the first of the Group of Seven (G7) developed nations to do so.
As optimism surrounded Greece on Wednesday, the Pound Sterling to Euro (GBP/EUR) headed towards the 1.35 mark, a surprise after week of trending in the vicinity of 1.41.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trending in the region of 1.5352.
US Dollar (USD) Exchange Rate Awaiting US Change in Non-Farm Payrolls, US Unemployment Rate for Fed Rate Hike Bets
Investors in the US Dollar (USD) will be looking towards Friday’s US Change in Non-Farm Payrolls and US Unemployment Rate stat for hints on a Federal Reserve rate hike time-frame and can have a major impact on the US Dollar (USD) exchange rate.
Wednesday’s ADP Employment Change statistic printed positively in May, coming in at 201K rather than the 200K forecast.
President and chief executive officer of ADP Carlos Rodriguez commented: ‘The labour market moved back up to the 200,000 jobs added mark in May, a number which has been something of a bellwether for healthy employment growth. We hope that the May number is the beginning of an upward trend going into the summer months.’
The US Dollar to Pound Sterling (USD/GBP) exchange rate is trending at 0.6504. The US Dollar to Euro (USD/EUR) exchange rate is trending in the region of 0.8868.