The British Pound to Euro (GBP/EUR) exchange rate softened in Friday’s trading while the British Pound to Australian Dollar (GBP/AUD), Canadian Dollar (GBP/CAD) and New Zealand Dollar (GBP/NZD) exchange rates gained; the British Pound to US Dollar (GBP/USD) remained trending in a tight range.
Euro (EUR) Boosted by German and Eurozone Gross Domestic Product (GDP)
The Euro was offered significant support when German Gross Domestic Product (GDP) stats beat economists’ forecasts. The seasonally adjusted ecostat rose from 1.2% to 1.4% in the fourth quarter of 2014, rather than declining to 1.0% as predicted.
Forex expert Pierre Martin commented: ‘The surprisingly robust figure from Germany is fuelling the hopes that Europe is finally turning the corner. With the excellent earnings season we have, we just needed a bit of improvement on the macro front to revive the rally, and now we have it.’
In addition, Eurozone GDP printed favourably rather than stagnating as expected. Q4 growth reached a seasonally adjusted 0.9% year-on-year rather than remaining at the forecast 0.8%.
However, Greece’s economy suffered a -0.2% quarter-on-quarter contraction in the last three months of 2014. The Euro has been volatile in recent weeks as a result of uncertainty surrounding talks between Greece and its creditors.
Economists suggest that the contraction could be accredited to the recent presidential election, which saw left-wing party Syriza voted into power. The party had been favoured amongst Greek citizens as it vowed to renegotiate the nation’s austerity package.
The Euro to British Pound (EUR/GBP) exchange rate hit a seven-year low of 0.7384 on Wednesday as a result of uncertainty in the Eurozone.
US Dollar (USD) Forecast to Fluctuate on University of Michigan Confidence
Meanwhile, the US Dollar also came under pressure this week when Thursday’s US Advance Retail Sales recorded a -0.8% contraction in December rather than the -0.4% forecast. November had also resided in negative territory at -0.9% and experts had hoped for a more favourable ecostat in the last month of 2014.
The figure came despite decreasing oil prices filtering through to the petrol pump, offering consumers a little more disposable income.
JP Morgan chief economist Michael Feroli commented: ‘Consumers are basically seeing all these positives but they’re being a little more prudent about how they spend. We’re not too concerned. Consumer spending is fine, it’s just not doing all that well given the very favourable fundamentals.’
Meanwhile, the US Dollar to British Pound (USD/GBP) exchange rate could be in for some hefty movement later in Friday’s session with the release of University of Michigan Confidence figures.
The preliminary February reading is expected to stagnate at 98.1—however any figure that betters forecasts could enable the ‘Buck’ to rally.
Canadian Dollar (CAD) Exchange Rate Remains Softer Despite Oil Price Increase
The Canadian Dollar softened slightly against other majors despite a rise in oil prices. Floundering prices have pressured the ‘Loonie’ lower in recent months. The ceasefire agreed by Russia/Ukraine this week boosted the price of black gold and a report suggesting US oil supply had substantially diminished offered additional support.
Market analyst Phil Flynn stated: ‘In short, the ceasefire in Ukraine with Russia will lower the chances of new sanctions on Russia, which should help the growth outlook for the region. This comes against a backdrop of massive central bank easing, which should help kick-start some demand.’
The Bank of Canada (BOC) recently made the decision to cut its benchmark interest rates by 25 basis points to 0.75% amid struggling global growth.
Australian Dollar (AUD) Sinks on RBA Rate Cut Forecasts
The Australian Dollar to British Pound (AUD/GBP) exchange rate fell on Friday after Reserve Bank of Australia (RBA) Governor Glenn Stevens intimated that the central bank forecasts a prolonged period of ‘below-par’ growth as well as a higher than initially projected unemployment peak.
In addition, Governor Stevens suggested that loosening monetary policy would likely be less effective than it previously would have been.
Stevens stated: ‘Today, such a channel may be less effective. Nonetheless we do not think that monetary policy has reached the point where it has no ability at all to give additional support to demand. Our judgement is that it still has some ability to assist the transition the economy is making, and we regard it as appropriate to provide that support.’
Droughts Forecast to Increase Milk Prices and New Zealand Dollar (NZD) Exchange Rate
Meanwhile, close neighbour the New Zealand Dollar could be in for gains in coming weeks as droughts threaten to boost dairy prices. The New Zealand Dollar to Australian Dollar (NZD/AUD) exchange rate reached 96.10 cents on Friday, a little short of its January 8th post float high of 96.54 cents.
Industry expert Tim Kelleher stated: ‘If we’re going to get a new high, I suspect it will be on Monday, Tuesday or Wednesday.’
The ‘Kiwi’ could make significant gains against close Trans Tasman counterpart the ‘Aussie’ if the RBA seem to be close to slashing rates again after a recent surprise rate cut.
The next Fronterra dairy auction is scheduled for next week and could see the ‘Kiwi’ rise up against other majors if another price jump occurs.
British Pound Exchange Rate Forecast: GBP/EUR, GBP/USD, GBP/CAD, GBP/NZD, GBP/AUD
The British Pound exchange rate could be in for major movement next week with the release of highly influential data, such as Tuesday’s UK Consumer Price Index (CPI). Investors will eye UK inflation levels extremely closely after this week’s Bank of England (BoE) inflation report and follow-up comments by Governor Mark Carney.
In addition, Wednesday’s session will see the publication of UK Employment Change and Unemployment Rate figures, which could be a major source of British Pound exchange rate movement.
The British Pound to Euro (GBP/EUR) exchange rate is trading at 1.3491. The British Pound to US Dollar (GBP/USD) exchange rate resides in the region of 1.5389. The British Pound to Canadian Dollar (GBP/CAD) exchange rate is reaching 1.9264. The British Pound to New Zealand Dollar (GBP/NZD) exchange rate hovers at 2.0728. The British Pound to Australian Dollar (GBP/AUD) exchange rate is trending in the proximity of 1.9887.
