UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate edged higher by around 0.4% on Friday morning, whilst the pound Sterling to US Dollar (GBP/USD) exchange rate was trending within a narrow range.
Thanks to its comparatively low trade weight the Pound strengthened versus some of its peers on Friday morning as traders took advantage of undervaluation. The Euro declined versus most of is peers thanks to a combination of trader profit taking and below-forecast German Industrial Production. The US Dollar, meanwhile, is holding steady as market sentiment improves following intervention from the People’s Bank of China (PBoC). Later this morning the GBP/EUR and GBP/USD exchange rates are likely to see volatility in response to British trade balance data.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3435.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4618.
Yesterday…
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Plunge after Eurozone Unemployment Dips
The Pound Sterling to Euro (GBP/EUR) exchange rate dived by around -1.1% on Thursday afternoon.
Despite the fact that British economic data produced positive results today, the Pound declined versus the majority of its most traded counterparts. The depreciation can be linked to speculation that the forthcoming speech from Chancellor George Osborne will be dovish in the extreme. Osborne is expected to announce that the UK will face a ‘cocktail’ of threats from a slowing global economy in 2016.
‘It is precisely because we live in an uncertain world. It is precisely because we have not abolished boom and bust as a nation, that you need to take these steps, difficult steps and I need to go explaining to the public, that the difficult times aren’t over, we have got to go on making the difficult decisions, precisely so that Britain can continue to enjoy the low unemployment and the rising wages that we see at the moment,’ Mr Osborne said.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3425.
Across the Channel, the Euro rallied versus its major peers thanks to mostly positive domestic data results. Of particular significance was December’s German Retail PMI which advanced from 49.6 to 50.5; breaking through the 50 barrier that separates growth from contraction. Another particularly supportive domestic ecostats was November’s Eurozone Unemployment Rate which unexpectedly dropped from 10.6% to 10.5% despite predictions of a rise to 10.7%.
‘At 10.5%, Eurozone unemployment is still well above that in the US or UK but the trend continues to head in the right direction,’ said SpreadCo analyst David Morrison. ‘Put this together with the better manufacturing and services PMIs from earlier in the week and it looks as if the ECB will soon be crowing about the success of their monetary policy.’
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Soften on Damp Market Sentiment
The Pound Sterling to US Dollar (GBP/USD) exchange rate declined by around -0.4% on Thursday afternoon.
On a more positive note for the UK, British data produced supportive results today. December’s Halifax House Prices eclipsed expectations of a 0.5% rise on the month, with the actual result advancing by 1.7%. In addition, December’s New Car Registrations advanced by 8.4% on the year which was a significant improvement over the previous growth of 3.8%.
In response to the New Car Registrations data, John Moylan, BBC industry correspondent, stated; ‘A big factor fuelling sales is the availability and cost of finance on forecourts. The SMMT says that 80% of cars are bought with some form of finance and around 60% are purchased using PCP’s. These Personal Contract Purchase plans mean customers can buy a new car for an affordable monthly payment in the same way that you might purchase a new mobile phone.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4574.
After turmoil in China’s equity markets saw the Shanghai Composite Index plunge by over 7% at the close of the Asian session, demand for safe-haven assets caused the US Dollar to strengthen versus many of its peers. Gains have been somewhat limited, however, thanks to Euro strength. The atmosphere of trader risk-aversion is unlikely to abate any time soon with persistently low crude oil prices weighing on investor confidence.
The US Dollar has also found support after US Ambassador to South Africa Patrick Gaspard stated that South Africa and the US made ‘tremendous progress’ on talks to resolve a trade dispute.
Pound Sterling to Euro, US Dollar Exchange Rates Forecast: Friday’s US Labour Market Data to Provoke Volatility
Later today there is the potential for market volatility in response to US Continuing Claims and Initial Jobless Claims, although these weekly readings are not considered high impact in terms of market moving potential. Friday however, will see a number of ecostats with the potential to shake things up for the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates.
During the Asian session we could see volatility in response to China’s Foreign Direct Investment data. Should the data falter, as has been the case in all Chinese economic data this week, market sentiment could dampen further which would bolster the appeal of the US Dollar.
In terms of European data, German Industrial Production and German Trade Balance will be likely to provoke Euro volatility. For those invested in the Pound, Trade Balance data is likely to be of interest.
Perhaps the most significant ecostats tomorrow, however, will be December’s US Change in Non-Farm Payrolls and Unemployment Rate.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.3376 to 1.3580.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.4531 to 1.4640 during Thursday’s European session.
