- Pound damaged as August interest rate cut odds rise – BoE’s Weale reverses opinion
- Euro mixed on lack of major data – Concerns raised about Italian bank debt
- US Dollar weakened by uncertain presidency chances – Sanders’ supporters reject Clinton
- UK GDP results beat forecasts – But data does little to support Pound
Pound (GBP) to Euro (EUR) Exchange Rate Down 0.5%, German CPI Ahead
The Pound Euro exchange rate fell on Thursday as the Federal Reserve elected to leave interest rates on hold. With the decision causing the US Dollar to fall, the Euro was able to post widespread gains.
GBP/EUR was left trending in the region of 1.1887.
The Pound was also trending in a softer position against the US Dollar, having dipped 0.2% from the day’s opening levels.
Today’s German Consumer Price Index showed a stronger acceleration in inflation than economists had predicted and the result lent the Euro additional support.
(Previously updated 28/07/2016)
Although the Pound showed some resilience on Tuesday, the pairing did come under pressure following revised comments from the Bank of England’s (BoE) Martin Weale.
GBP lost ground against the Euro (EUR) and US Dollar (USD) over the course of the European session.
Over the last seven days, GBP/EUR has moved between highs of 1.2038 and lows of 1.1872.
GBP/USD, meanwhile, has experienced highs of 1.3271 and lows of 1.3069.
The Euro has been unstable lately, as while domestic data has been fairly low-key, the single currency has been unsettled by fears about Italian economic stability.
The US Dollar has been on an overall decline, as hopes for a stable start to the Democratic Convention fell through yesterday.
UK Economic News: Pound Weakened against Peers by Weale’s Sudden Dovishness
The Pound has flopped against most of its rivals lately, having recorded declines of a minor amount against the Euro (GBP EUR), -0.5% against the Australian Dollar (GBP AUD) and -0.8% against the New Zealand Dollar (GBP NZD). Although the UK currency has managed to stage a recovery of 0.2% against the US Dollar (GBP USD), the Pound has nonetheless been weakened overall against rivals compared to yesterday.
The triggering factor for this overall drop off has been comments from BoE official Martin Weale, who has made an abrupt about-face in tone on the possibility of an August interest rate cut; this contrasts notably with more hawkish comments made on July 18th.
Speaking to the Financial Times, Weale stated that in the aftermath of last week’s poor retail sales and PMI flashes for July;
‘I see things rather differently from what I would have done had we not had those numbers and the material point is that they were collected after July 12, so after the initial shock of the Referendum. What I said last week is that I would like more information as well as more reflection and I have had more information’.
Just as last week’s comments were not a guarantee that a rate freeze would take place, these latest words do not make a rate cut a definite, although the chances of such an outcome have assuredly risen, regardless.
Euro Mixed on Italian Debt Fears while US Dollar Slides on Staggered Start to Democratic Convention
For the Euro, the second day of the week has brought no less certainly than the first, with gains of 0.3% against the US Dollar (EUR USD) and 0.4% against the South African Rand (EUR ZAR) coming alongside losses of -0.9% against the Japanese Yen (EUR JPY) and the New Zealand Dollar (EUR NZD).
The latest news out of the Eurozone has consisted of a falling unemployment rate for June, along with a move closer to positivity for June’s annual Spanish PPI.
In the bigger picture, fears are mounting that the high levels of Italian bank debt may generate a crisis similar to the ‘Grexit’ situation seen around this time last year.
The US Dollar has been an unsafe option recently, having fallen considerably against virtually all of its regular peers; this has included drops of -0.3% against the Euro (USD EUR) and the Pound (USD GBP).
In the latest political news out of the US, the Democratic Convention has gotten off to an imperfect start, with a large number of remaining supporters of Bernie Sanders throwing into doubt the question of whether stability-linked nominee Hillary Clinton can beat Republican Donald Trump in November.
Future GBP, EUR, USD Forecast: UK GDP, German Confidence and US Housing Stats due Soon
The last notable piece of pairing data due today will come from the US in the afternoon, when the nation’s June new home sales stats are due. Expectations have been for a shift from a prior 551k to 550k.
Looking further ahead, tomorrow morning will bring the UK’s GDP growth rate preliminary figures for the second quarter. As of writing, estimates have been for no change at 0.4% on the quarter but a minor dip on the year.
The Eurozone will bring Germany’s GfK consumer confidence results for August tomorrow morning; a minor decline is forecast to be seen.
Current GBP, EUR, USD Exchange Rates
The Pound Euro (GBP EUR) exchange rate was trending in the region of 1.1920 and the Euro Pound (EUR GBP) exchange rate was trending in the region of 0.8391 today.
The Pound US Dollar (GBP USD) exchange rate was trending in the region of 1.3128 and the US Dollar Pound (USD GBP) exchange rate was trending in the region of 0.7618 today.
The Euro US Dollar (EUR USD) exchange rate was trending in the region of 1.1015 and the US Dollar Euro (USD EUR) exchange rate was trending in the region of 0.9081 today.
