The British Pound to Swiss Franc (GBP/CHF) and British Pound to Euro (GBP/EUR) exchange rates began Thursday’s session trending higher, while the British Pound to Australian Dollar (GBP/AUD), British Pound to US Dollar (GBP/USD) and British Pound to Canadian Dollar (GBP/CAD) exchange rates remained in a tight range.
The US Federal Reserve’s Beige Book remained upbeat as near record breaking snowfall failed to hinder the US economic recovery.
The Beige Book stated: ‘Reports from the twelve Federal Reserve Districts indicate that economic activity continued to expand across most regions and sectors from early January through mid-February. Six Districts noted that the local economy expanded at a moderate pace since the prior reporting period.’
Earlier… The British Pound to Swiss Franc (GBP/CHF), British Pound to Canadian Dollar (GBP/CAD) and British Pound to Euro (GBP/EUR) exchange rates all recorded gains in Wednesday’s European session while the British Pound to Australian Dollar (GBP/AUD) exchange rate declined and the British Pound to US Dollar (GBP/USD) exchange rate remained in a tight range.
Markit’s UK Services and Composite Purchasing Managers Indexes will be out shortly and could impact British Pound trading moderately.
Earlier… The British Pound to Swiss Franc (GBP/CHF) exchange rate gained in the first half of Tuesday’s European session while the British Pound to Canadian Dollar (GBP/CAD) and British Pound to Australian Dollar (GBP/AUD) exchange rates tumbled; the British Pound to Euro (GBP/EUR) and British Pound to US Dollar (GBP/USD) exchange rates both remained in a tight range.
Markit’s UK Construction PMI Jumps – British Pound (GBP) Gains
The British Pound exchange rate could advance against other majors after Markit’s UK Construction Purchasing Managers Index (PMI) printed more favourably than forecast.
The index rose from 59.1 to 60.1 in February, rather than slipping to 59.0 as predicted.
The Euro failed to rise on favourable German domestic data on Tuesday as confidence that Greece can successfully renegotiate its austerity deal without leaving the Eurozone dwindled.
German Retail Sales jumped in January with 2.9% month-on-month growth, pulling the annual figure up to 5.3% from a positively revised 4.8%. Economists had forecast a fall to 3.0%. The upbeat data recorded the fastest pace of growth in seven years.
Berenberg Bank senior economist Christian Schulz commented: ‘Cheap oil, healthy income gains, low interest rates and fading risks combined to make a very strong start to the year for German retailers. Private consumption looks set to be a major growth driver in 2015 and, at this rate, would put a severe upside risk to our forecast of Gross Domestic Product (GDP) growth of merely 0.3% quarter-on-quarter in Q1.’
JPM calles the rise in German retail sales “legendary”: pic.twitter.com/1pRLXnh9RA
— Richard Barley (@RichardBarley1) March 3, 2015
Meanwhile, the Swiss Franc was offered little support when the fourth quarter Swiss Gross Domestic Product (GDP) figure remained steady at 1.9% rather than slipping to 1.7% as economists had forecast.
As the Swiss National Bank (SNB) announced it was removing the tie between the Euro and Swiss Franc in January, economists will be more interested in the growth from Q1.
Analyst Ipek Ozkardeskaya commented: ‘The government spending and significant rise in exports explain the major part of the growth stability in the fourth quarter. This being said, the most expected economic results are those of the first quarter, (when) the SNB decided to remove the Euro/Swiss Franc floor.’
The Canadian Dollar could be in for an interesting couple of days this week with the release of both Canadian Gross Domestic Product figures and the Bank of Canada (BOC) interest rate announcement.
Investors had initially forecast another rate cut this week, but BOC Governor Stephen Poloz suggested that the recent rate cut would buy some time for stability in the near future.
Economist Benjamin Reitzes commented: ‘BOC Governor Poloz’s less dovish speech gave the ‘Loonie’ a boost, though most gains were given back by week’s end. Between the slew of data and BOC policy announcement, there’s plenty of catalysts for a volatile week for the Canadian Dollar.’
Year-on-year, Canadian GDP is expected to increase from 1.9% in December to 2.5%. If the figure does rise in line with forecasts, the ‘Loonie’ to British Pound (CAD/GBP) exchange rate could rally.
Another currency to be affected by central bank movements is the Australian Dollar. The ‘Aussie’ has been trending lower against other currencies as investors forecast another cut to the Reserve Bank of Australia’s (RBA) official cash rate (OCR).
RBA Rate Stability Offers ‘Aussie’ Exchange Rate Gains
However, to the great surprise of many, the RBA left rates stable at 2.25% on Tuesday.
RBA Governor Glenn Stevens stated: ‘The Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will further assess the case for such action at forthcoming meetings.’
In the present circumstances, amid a backdrop of tumbling inflation and global weakening, many investors are trying to predict central bank movements in order to forecast currency fluctuations. However, central banks are becoming more elusive ahead of announcements, leaving investors to dig deeper boreholes into the central bank’s psyche with the hope of finding something enlightening at the end of them.
The US Dollar is expected to fluctuate on Wednesday with the release of US ISM Non-Manufacturing Composite and the Federal Reserve’s Beige Book. Both of Wednesday’s events could cause major US Dollar movement.
In addition, Federal Reserve officials are expected to speak throughout the week, and the tone of their comments could see the ‘Buck’ rise and fall.
British Pound Exchange Rate Forecast: GBP/EUR, GBP/CHF, GBP/USD, GBP/AUD, GBP/CAD
Markit is scheduled to release UK Composite and Services PMI on Wednesday which may cause some moderate British Pound movement. However, Thursday could be more influential for British Pound trading with the release of the Bank of England (BoE) interest rate decision.
The British Pound to Euro (GBP/EUR) exchange rate is trading in the region of 1.3809. The British Pound to Swiss Franc (GBP/CHF) exchange rate is reaching 1.4749. The British Pound to US Dollar (GBP/USD) exchange rate is fluctuating at 1.5251. The British Pound to Canadian Dollar (GBP/CAD) exchange rate resides at 1.8970. The British Pound to Australian Dollar (GBP/AUD) exchange rate is trending in the region of 1.9517.
