The Pound (GBP) managed to rally against a number of major peers on Thursday but was little moved against the Euro (EUR) and US Dollar (USD) as Eurozone inflation data matched forecasts and economists deemed that the ‘Greenback’s fall was overdone.
Sterling advanced broadly against the riskier commodity and emerging market currencies such as the Australian Dollar (AUD), New Zealand Dollar (NZD) and Canadian Dollar (CAD) as concerns over falling commodity prices and a rallying US Dollar weighed heavily.
The currency managed to claw back losses after Bank of England policy maker Martin Weale said that the bank should ignore the fall in inflation reported on Tuesday when it comes to setting interest rate policy. Weale added that the bank should place a greater emphasis on the speed and recovery of the UK economy.
Weale is one of two policymakers on the nine-strong monetary policy committee to vote for higher interest rates in recent months. Along with Ian McCafferty, a former CBI economist, he has voted since August to raise rates by a quarter of 1%.
Weale also said that he expects wage growth in the UK to increase at a faster pace after the nation’s unemployment rate fell to 6%.
“The tightening of the labour market means that, instead of waiting to see wage growth pick up, I think it is appropriate to anticipate that wage growth,” he said. “The margin of spare capacity is shrinking rapidly and all logic suggests that ought to lead to an increase in inflationary pressures over the two to three-year horizon which concerns the Committee.”
Against the Euro, the Pound was struggling to get back above the 1.25 level. The single currency received some support from data releases, which matched with economist expectations.
Core inflation, (a measure that strips out the more volatile components of headline inflation) fell from 0.9% to just 0.8% in the year to September, a more marginal decline that the 0.7% drop expected by analysts. Inflation across the region remains well below the European Central Banks target of 2%.
Against the US Dollar, the Pound was trading close to an 11-month low as economists look ahead to the latest US Jobless Claims reports and data, which is likely to show that industrial production in the world’s largest economy improved.
Pound Exchange Rate Forecast
Sterling is likely to regain ground against the Euro over the coming weeks if UK economic data comes in positively and as fears grow that the Eurozone is heading towards a triple-dip recession.
As the session progresses and US data releases draw nearer the GBP/USD exchange rate is forecast to soften.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.5992 ,
Pound Sterling,,Euro,1.2499 ,
Pound Sterling,,Australian Dollar,1.8309 ,
Pound Sterling,,New Zealand Dollar,2.0173 ,
US Dollar,,Pound Sterling,0.6252 ,
Euro,, Pound Sterling ,0.7998 ,
Australian Dollar,, Pound Sterling ,0.5456 ,
New Zealand Dollar,, Pound Sterling,0.4958 ,
[/table]
