UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.2% on Thursday afternoon, whilst the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within a limited range.
In response to the Bank of England (BoE) interest rate decision the Pound recovered daily losses versus a number of its major peers. The appreciation was the result of the accompanying meeting minutes which reveled that known hawk Ian McCafferty continued to argue for a rate hike despite expectations that all nine policymakers would vote in favour of leaving policy unchanged.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3254.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4390.
Earlier…
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Plummet after German GDP Met Estimates
The Pound Sterling to Euro (GBP/EUR) exchange rate dived by around -0.6% on Thursday morning.
As traders await the Bank of England (BoE) interest rate decision, the Pound softened versus all but the risk-correlated assets. The depreciation can be linked to speculation that the Monetary Policy Committee (MPC) will be highly unlikely to alter policy and outlook is expected to remain dovish. Investors will closely scrutinise the meeting minutes to unearth any clues as to policy outlook. However, many traders fear that the MPC will vote unanimously to hold rates thanks to concerns regarding low inflation, tepid wage growth and mounting external risk factors. This would be particularly damaging to demand for the Pound given previous meetings have seen MPC member Ian McCafferty vote for an immediate rate hike.
‘There was a feeling that once the Fed got moving, expectations for the Bank of England would get pulled forward,’ said Paul Lambert, head of currency at London-based asset manager Insight Investment. ‘That hasn’t happened at all.’
Neil Mellor, a currency strategist at BNY Mellon stated; ‘The Pound has been a victim of unrequited expectations about monetary policy. Last year, [BOE Gov. Mark] Carney dusted off his hawkish rhetoric, but then oil and China came along.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3161.
Conversely, the Euro rallied versus its major peers today after positive domestic data supported demand. Non-seasonally adjusted German Gross Domestic Product met with the median market forecast 1.7% growth on the year in 2015. Incidentally the 1.7% German growth is the strongest rate in four years. The single currency has also found continued support since the turn of the year thanks to carry trades as investors take advantage of the European Central Bank’s (ECB) accommodative policy to invest in higher-yielding assets.
‘German companies went through a year that dealt them a lot of uncertainty,’ said Jens Kramer, an economist at NordLB in Hanover in response to the German GDP data. ‘They learned that the German economic machine can run smoothly even when there’s turbulence around, and that they can be confident in domestic demand driving growth, also this year. That said, risks have increased.’
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Softens on Safe-Haven Demand
The Pound Sterling to US Dollar (GBP/USD) exchange rate softened by around -0.3% on Thursday morning.
Although the Shanghai Composite Index ended the Asian session close to 2% higher, global equity markets continue to face turmoil against the backdrop of plummeting crude oil prices. This has led investors to seek safe-haven assets which, in turn, caused the US Dollar to strengthen versus a number of its peers. The appreciation has been somewhat sluggish, however, thanks to the strength of the common currency.
US stock futures continue to remain weak as turmoil in Chinese markets fanned concerns that the slowdown in world’s second largest economy will spread. Today’s US labour market data has the potential to drive changes for US equity market futures, but many traders remain convinced that the best method is to play it safe at this time. ‘We’ll have to digest all these earnings numbers and then we’ll have a clearer picture, but if you look around the world there’s not many positive drivers,’ said Benno Galliker, a trader at Luzerner Kantonalbank AG. ‘Play it safe, that’s the message at the moment.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4364.
Exchange Rates Forecast: Market Volatility Expected in Response to US Advance Retail Sales and Consumer Confidence
The Pound Sterling to Euro and US Dollar exchange rates will almost certainly see changes in response to the Bank of England interest rate decision. But looking further ahead, market volatility is likely on Friday following the publication of high-impact US economic data. Both the University of Michigan Consumer Confidence report and Advance Retail Sales have the potential to not only impact US Dollar movement, but also the Euro and therefore the Pound. Friday’s British Construction Output will also be of interest to investors, as well as Eurozone Trade Balance.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading within the range of 1.3135 to 1.3280 during Thursday’s European session.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.4358 to 1.4424.