UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.5% on Tuesday morning, whilst the Pound Sterling to US Dollar (GBP/USD) exchange rate edged higher by around 0.3%.
As traders await crucial British inflation data the Pound edged higher versus most of its major peers. The appreciation can be linked to speculation that the Consumer Price Index will print positively given the current weak Pound and low oil prices.
The Euro is likely to see volatility in response to the Eurozone ZEW Economic Sentiment survey, whilst the US Dollar should see changes following the publication of the Housing Market Index.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2977.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4496.
Yesterday…
Pound Sterling to Euro (GBP/EUR) Conversion Rate Predicted to Strengthen after Eurozone Trade Surplus Misses Estimates
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.6% on Monday afternoon.
Despite the fact that UK data printed positively on Monday, Pound Sterling exchange rates have been mixed, with some declines being recorded. The combination of a dovish outlook from the Bank of England (BoE) and uncertainties regarding the forthcoming EU referendum are projected to have a long-term detrimental impact on demand for the UK asset. Many experts are unconvinced that Prime Minister David Cameron will be able to persuade all Eurozone countries to accept the terms of the proposed reforms to Britain’s membership to the European Union. Without the backing of Eurozone ministers, Cameron’s argument for staying in the EU will be greatly diminished.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2953.
In response to market intervention from the People’s Bank of China (PBoC) trader risk appetite improved significantly. This saw demand for the Euro soften as investors no longer required funding assets. Also weighing on demand for the common currency today was news that Germany’s top court is unhappy with the European Central Bank’s (ECB) assertion that they will do ‘whatever it takes’ to support economic and inflationary growth. This directly contradicts Germany’s constitution, and could see influential banks such as Bundesbank work to limit the effectiveness of the ECB’s stimulus program. Also aiding the Euro depreciation was Eurozone Trade Balance for December which showed the surplus failed to grow in line with the median market forecast.
Pound Sterling to US Dollar (GBP/USD) Conversion Rate Predicted to Edge Lower despite Improving Trader Risk Appetite
The Pound Sterling to US Dollar (GBP/USD) exchange rate edged fractionally lower by around -0.4% on Monday afternoon.
Although the Pound is trending lower versus the majority of its currency competitors, domestic data was still comparatively positive. Rightmove director Miles Shipside stated; ‘Regions outperforming the national average with over 10% more newly marketed homes with two bedrooms or fewer are London, East, South East, South West, West Midlands, and Yorkshire and the Humber, and if this trend continues the increased competition among new sellers may help to temper price rises. More and more agents are reporting a healthy return in first-time buyer numbers, and with the cards increasingly stacked in their favour 2016 could prove to be the year of the first-time buyer.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4441.
Although heightened trader risk-appetite usually coincides with US Dollar depreciation, the negative correlation with the weak Euro has prompted USD gains. What’s more, speculation that demand for funding assets will abate should support US Dollar appreciation. With a complete absence of domestic data to provoke volatility today, USD trade will be dictated by changes in market sentiment and Euro positioning. A speech from ECB President Mario Draghi later today has the potential to cause US Dollar volatility thanks to the close EUR/USD trade relationship.
Pound Sterling Forecast: UK Inflation Data to Stimulate Volatility
With an absence of further British data to provoke changes today, the Pound Sterling is likely to continue trending lower versus most of its major peers. With that said, the GBP/EUR conversion rate is likely to hold gains given the extent of the current appreciation and lack of further European data to cause movement. However, the forthcoming Draghi speech could impact on the currency market.
Tuesday will see significant GBP volatility with January’s Consumer Price Index due for publication. Low inflation has plagued many of the world’s major economies, but the UK has suffered particularly given that the Bank of England (BoE) have repeatedly highlighted low inflation as a reason to hold off from hiking the benchmark interest rate.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.2900 to 1.2990.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.4423 to 1.4536 during Monday’s European session.
