The Pound has received a boost today from positive labour and wage growth data, suggesting Sterling has returned to data-correlated movement.
- GBP EUR, GBP USD recovering – Latest jobless claims data boosts Pound
- EUR Soft as Construction Output Slows – Dramatic decline for output figures
- USD Weakens on Latest CPI Figures – Core inflation unexpectedly edged lower
- GBP EUR, GBP USD forecast – Busy data day tomorrow to create exchange rate volatility
The Euro is on the rise due to investor hopes that the European Central Bank (ECB) will at least discuss tapering its quantitative easing programme, while US Dollar exchange rates have remained weak after yesterday’s mixed consumer price index results.
GBP EUR Advances, GBP USD Weakens ahead of Public Spending Data
08.43, 21/10/2016; The Pound has opened today’s session on a mixed footing as markets await the latest UK government borrowing data. Forecasts are for the deficit to have eased lower from around -£10 billion to -£8.5 billion.
Euro Firms Ahead of ECB Meeting; Analysts Predict No Policy Changes
08.40, 20/10/2016; The Euro has firmed against the Pound, while trending narrowly around opening levels versus the US Dollar, as the next European Central Bank policy decisions approach. Analysts are expecting no changes – although everyone will be keeping a sharp eye out for hints of changes to quantitative easing during Mario Draghi’s subsequent press conference.
Hammond Answers MP’s Brexit Questions; GBP Edges Back Down to Opening Levels
16.27, 19/10/2016; Chancellor of the Exchequer Philip Hammond is current answering MP’s questions regarding the government’s plans for the Brexit negotiations. He has reiterated Theresa May’s position regarding MPs being allowed to debate the government’s stance going into negotiations.
UK Unemployment at Near 11-Year Low; Pound Inching Higher
The Pound is trending narrowly after the release of the latest labour market data, which has printed largely positive, with a few caveats. The number of people claiming unemployment benefits only increased by 0.7k in September, despite forecasts of a 3k rise. However, the previous month’s increase in joblessness claims was revised sharply higher from 2.4k to 7.1k, around twice the number the latest figure has undercut forecasts by. More positively, average earnings excluding bonuses growth for the three months to August on the year accelerated from an upwardly revised 2.1% to 2.3%.
GBP EUR and GBP USD are currently crawling higher, although the extent of the gains has already eased slightly after economists pointed out that the period covered by the figures was before businesses realised the UK was headed towards a ‘Hard Brexit’, so the recent heightened uncertainty will not yet be present in the data.
Euro Exchange Rates Firm; Investors Hoping for ECB QE Taper Talk
The Euro is barely in positive territory against most of its commonly-traded peers as investors await tomorrow’s European Central Bank (ECB) meeting. Markets are hoping to hear talk of a taper to the quantitative easing programme, although this largely goes against the outlook of ECB officials and economists, who are more likely to back an extension of the programme.
A marked slowdown in construction output during August has softened Euro gains. Output declined -0.9% in August on a seasonally-adjusted basis after advancing 1.8% in July, while the year-on-year working day adjusted rate dropped from 3.1% to 0.9%.
Unexpected Core CPI Slowdown Continues to Weigh on US Dollar Exchange Rates
The US Dollar may be edging higher against the Pound, but overall the ‘Greenback’ is largely soft. Yesterday’s underwhelming data continues to weigh on the markets; consumer prices saw a strong rise in September to 1.5% as forecast, but less volatile core prices unexpectedly edged lower from 2.3% to 2.2%. Core price growth on the month slowed twenty basis points to 0.1%, which was double the slowdown forecast.
The latest Chinese data has also provided something for the markets, as well as the Federal Reserve, to ponder. The third quarter GDP figures remained strong, reprinting at 1.8% quarter-on-quarter and 6.7% year-on-year. Retail sales growth also accelerated, but industrial production growth edged lower, falling from 6.3% to 6.1% year on year. A tick higher to 6.4% had been expected. While not a huge change, any signs of slowing activity in China sends jitters through the markets thanks to warnings of a ‘hard landing’ from the world’s second-largest economy.
Meanwhile, the latest weekly Gallup US economic confidence index has held steady at -10; far above the post-crash lows but still showing negative sentiment overall. The positive takeaway is that consumer sentiment has remained largely stable over the past year, with standard deviation at just 2.4 points – half that of the two previous calmest years in recent times.
GBP EUR, GBP USD Exchange Rate Forecast; QE Action from the ECB Tomorrow?
There is no UK data left to be released today, but tomorrow will hold the latest retail figures for September. It seems that the Pound is once-again responding to the influence of domestic data, so sales growth could help the Pound further recover from its ‘flash crash’, while slowing sales will cool Pound demand.
Meanwhile, markets will respond positively should the ECB reveal it has discussed tapering QE. However, just as likely, if not more so, as the prospect of a winding down of asset purchases is that the ECB votes to change the parameters of the scheme. One of the problems currently facing the European Central Bank is that the rules of the programme are limiting its ability to function.
When the programme was created, it was decided that the rate of asset purchases from member states had to be proportional to the size of their economies; a rule largely implemented to appease dissenting countries such as Germany. However, because German debt is in short supply it has become too expensive for the ECB to buy; Italy, on the other hand, has plenty of available debt but the current QE parameters prevent the ECB from buying it.
US data today includes the MBA mortgage applications, housing starts and building permits figures, as well as a speech from the Federal Reserve’s John Williams. Further data released tomorrow will include the initial continuing and jobless claims, the Philadelphia Fed manufacturing index, existing home sales figures and the leading indicators for September.
GBP, EUR, USD Interbank Rates
At the time of writing, the Pound Euro (GBP EUR) exchange rate was trending in the region of 1.12, while the Euro Pound (EUR GBP) exchange rate traded around 0.89.
The Pound US Dollar (GBP USD) exchange rate was trending in the region of 1.23, while the US Dollar Pound (USD GBP) exchange rate traded around 0.81.
The Euro US Dollar (EUR USD) exchange rate was trending in the region of 1.09, while the US Dollar Euro (USD EUR) exchange rate traded around 0.90.
