UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate gained by around 0.4% on Monday morning, whilst the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within a limited range.
After Bank of England (BoE) Monetary Policy Committee (MPC) member Kristin Forbes warned that the British economic recovery could be held back if the central bank keeps the benchmark interest rate at a record-low for much longer. This caused the Pound to strengthen versus the majority of its most traded currency rivals. In addition, Rightmove House Prices in August accelerated by 6.4% on the year which supported demand for the Pound.
The Euro, meanwhile, edged lower as traders await approval for the latest Greek bailout deal from Eurozone members. German Chancellor Angela Merkel stated that Germany would like the International Monetary Fund (IMF) involved because of their diligence, but the IMF has made it quite clear that their involvement is subject to Greek debt restructure.
The US Dollar, meanwhile, is holding steady as traders await domestic data due for publication later on Monday afternoon. Given the varied results from recent ecostats, in combination with uncertainties regarding China and Greece, the likelihood of a September Federal Reserve rate hike is looking increasingly unlikely which is weighing on demand for the ‘Greenback’ (USD).
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4128.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5656.
Previously…
Towards the close of Friday’s European session, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4062, whilst the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5642.
Pound Sterling (GBP) Exchange Rate Forecast to Soften on Inflation
Given that Bank of England (BoE) Governor Mark Carney stated that low inflation was a temporary phenomenon in response to tanking energy prices, Tuesday’s inflation data is likely to disappoint. Energy prices have tumbled further since the previous inflation reading which would suggest that the UK will move into deflationary territory once again. The Pound’s one saving grace could be the Core Consumer Price Index which doesn’t include volatile energy prices.
In addition to the Consumer Price Index and the Core Consumer Price Index; Rightmove House Prices, Retail Sales, Retail Sales including Auto, Central Government NCR, PSNB ex Banking Groups, Public Finances and Public Sector Net Borrowing will all have the potential to provoke changes for the British asset.
Euro (EUR) Exchange Rate Forecast to Soften after Euro-Area GDP Falters
After Friday’s data showed that Euro-area growth failed to meet with expectations, there is a high likelihood that the coming week’s data will be weak. Credit Agricole has stated that the European Central Bank’s (ECB) recent statement, which showed that policymakers were willing to intervene in the market if necessary, will cause the Euro to trend down given the widening policy divergence between Europe, the UK and the US.
Influential European data publications over the coming week will be a little thin on the ground. Friday’s Eurozone Consumer Confidence report will be the most likely data publication to provoke changes for the common currency.
US Dollar (USD) Exchange Rate Forecast to Fluctuate with Several Influential Data Publication
Given that US economic data has produced varied results over the past few weeks, there is a high likelihood that the coming week’s data will cause US Dollar fluctuations. Of particular significance will be the Federal Open Market Committee (FOMC) minutes from the most recent policy decision. This could contain clues as to the timing of a benchmark rate hike.
In addition to the FOMC minutes; NAHB Housing Market Index, Net Long-term TIC Flows, Total Net TIC Flows, Building Permits, Housing Starts, MBA Mortgage Applications, Consumer Price Index, Consumer Price Index Ex Food & Energy, Real Avg Weekly Earnings, Continuing Claims, Initial Jobless Claims, Existing Home Sales, Leading Indicators, Philadelphia Fed., Markit Manufacturing PMI and the Baker Hughes US Rig Count will all have the potential to cause US Dollar fluctuations.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3967 to 1.4062 during Friday’s European session.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.5585 to 1.5660 during Friday’s European session.