UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate, and Pound Sterling to US Dollar (GBP/USD) exchange rate were trending within a limited range on Tuesday morning.
After having strengthened on Monday in response to hawkish comments published by Bank of England (BoE) deputy Governor Jon Cunliffe, who stated that rate hikes would be gradual over the next 12 months, the Pound is holding relatively steady versus its peers in the early stages of Tuesday’s European session. Traders await UK public finances data to provoke Sterling volatility.
With many investors convinced that the European Central Bank (ECB) will look to ease policy over the next few months, demand for the single currency remains subdued. The Euro is holding a weak position on Tuesday morning ahead of September’s Eurozone Consumer Confidence data.
Now that economists’ have digested the Federal Open Market Committee (FOMC) decision to hold the cash rate, the US Dollar is holding a stronger relative position on Tuesday morning. Trade is likely to be quiet, however, ahead of July’s US House Price Index.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3858.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5494.
Yesterday…
Pound Sterling to Euro (GBP/EUR) Exchange Rate Predicted to Strengthen even after Tsipras Re-Election
The Pound Sterling to Euro (GBP/EUR) exchange rate edged higher by around 0.8% on Monday afternoon.
After the Federal Reserve opted to hold the cash rate and present a dovish policy outlook in the accompanying press conference, many traders pushed back bets as to the timing of the first Bank of England (BoE) benchmark rate increase. This caused the Pound to soften versus its major peers. However, on Monday morning the Pound broadly strengthened after analysts at UniCredit SpA predicted that the British asset would advance more than 6% to $1.65 by the end of the first quarter of 2016. UniCredit SpA, Italy’s largest lender, predicts that the Fed will hike the lending rate in December and the Bank of England (BoE) will follow soon after.
‘The process of policy normalization in the UK will start sooner than the market expects,’ said Roberto Mialich, a Milan-based senior foreign-exchange strategist at UniCredit. ‘Sterling will remain on a relatively firm tone.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently tending in the region of 1.3847.
After the Greek elections saw Alexis Tsipras named Prime Minister again by a decent margin, the shared currency strengthened versus its major peers. Although embattled Greece faced many problems while Tsipras negotiated a deal to unlock credit, traders were concerned that new leadership would undo all of the progress made. Tsipras is no longer towing the party line of anti-austerity, but rather promoting equality and his mission to rid the Hellenic nation of deeply embedded corruption.
Tsipras told supporters that he would tackle endemic corruption in the country. ‘The mandate that the Greek people have given is a crystal clear mandate to get rid of the regime of corruption and vested issues,’ he said. ‘We will show how effective we will be. We will make Greece a stronger place for the weak and vulnerable, a fairer place.’
However, Euro gains were short-lived amid mounting speculation that the European Central Bank (ECB) will be forced to expand quantitative easing in the face of a lack of inflationary pressure.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.3721 to 1.3862.
Pound Sterling to US Dollar (GBP/USD) Conversion Rate Forecast to Soften despite Weak US Existing Home Sales
The Pound Sterling to US Dollar (GBP/USD) exchange rate softened by around -0.2% on Monday afternoon.
In addition to the Pound gaining versus its competitors after hawkish predictions from UniCredit analysts, domestic data produced positive results. On the year, September’s Rightmove House Prices saw growth of 6.4%; equalling the previous growth figure. On the month, Rightmove House Prices advanced by 0.9% in September; bettering the previous contraction of -0.8%.
Rightmove director Miles Shipside said: ‘High demand, lack of suitable supply, and increasingly stretched affordability are leading to some extremes in market forces in different sectors and parts of the country. One of the effects is that those who own property that is in most demand, either by type or location, are seeing their values continue to rise. Their properties are rich in features and benefits that others want to buy, and as a consequence they are getting proportionately richer than either owners of less desirable homes or those who are not on the housing ladder at all.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5516.
After the Federal Open Market Committee (FOMC) decided to hold the cash rate, the US Dollar dived versus most of its major peers. The depreciation wasn’t particularly long-lasting, however, thanks to profit taking and traders taking advantage of a lower-valued Dollar. Although Fed Chairwoman Janet Yellen’s accompanying speech was particularly dovish in tone, many rate hawks are speculating that the Fed was deliberately talking down the potential for a 2015 rate hike amid concerns regarding ‘Greenback’ (USD) overvaluation. Many economists still predict that the Fed will hike rates in either October or December.
US Existing Home Sales contracted by -4.8% in August; well beyond the median amrket forecast -1.6%. Despite the poor result, the report had minimal impact on Dollar movement with most traders agreeing that the data will not impact FOMC rate decisions.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.5478 to 1.5568 during Monday’s European session.
Pound Sterling (GBP) Exchange Rate Forecast to Fluctuate against Euro (EUR), US Dollar (USD) on Market Sentiment
Given the absence of further domestic data on Monday, the Pound is likely to hold steady versus most of its major peers for the remainder of the European session. However, there is the potential for fluctuations depending on market sentiment and developments in China.
Tuesday is likely to see significant Sterling volatility with UK public finances data due for publication.