The British Pound to Euro (GBP/EUR), British Pound to US Dollar (GBP/USD), British Pound to South African Rand (GBP/ZAR) and British Pound to Chinese Yuan (GBP/CNY) exchange rates were all trending in a narrow range at the beginning of Tuesday’s European session ahead of Markit’s UK Construction Purchasing Managers Index (PMI).
Earlier… The British Pound to Euro (GBP/EUR) and British Pound to US Dollar (GBP/USD) exchange rates remained bearish in Monday’s session despite favourable UK manufacturing data, while the British Pound to South African Rand (GBP/ZAR) and British Pound to Chinese Yuan (GBP/CNY) exchange rates gained.
Monday saw Markit’s UK Manufacturing Purchasing Managers Index (PMI) reach 54.1 in February, rather than the forecast 53.4, after January’s positively revised 53.1.
Meanwhile, UK Mortgage Approvals figures acquired by the Bank of England (BoE) fell a little below the 61.0K forecast, at 60.8K in January. Despite being a little below predictions, the rate of mortgage approvals has remained steady, despite some housing market data pointing toward a possible slowdown in the sector.
The BoE report read: ‘We expect support for housing market activity to come over the coming months from the recent Stamp Duty reform, very low mortgage rates, elevated consumer confidence, a pick-up in earnings growth and rising employment.’
US ISM Manufacturing and Personal Consumption Expenditure Forecast to see US Dollar Fluctuate
The US Dollar is trading tentatively ahead of highly influential US data, such as Personal Consumption Expenditure and ISM Manufacturing stats.
The US Dollar exchange rate gained some popularity in the early part of Monday’s European session when the People’s Bank of China (PBOC) announced another surprise rate cut. The US Dollar hovered just a shade below 11-year highs against a whole host of currency peers on the news of the second downward adjustment to rates in three months.
Goldman Sachs economist Yu Song commented: ‘Further benchmark interest rate cuts are also possible. The government is also loosening other policies such as allowing the exchange rate to depreciate modestly against the [US Dollar] and stepping up infrastructure investments.’
The Chinese Yuan to US Dollar (CNY/USD) exchange rate hit a two-year low on the news that the central bank was implementing further monetary policy easing as fears for the fate of China’s economy heightened.
Credit Agricole strategist Dariusz Kowalczyk commented: ‘It’s pretty clear a rate cut is negative for the currency. Stimulating the economy has taken precedence over stabilising the currency. They’ll allow more depreciation, and it makes sense because the Dollar is so strong.’
However, China’s final HSBC Manufacturing PMI reached 50.7 in February—a seven-month high.
The South African Rand broadly softened against the Pound (ZAR/GBP) and other major currencies when the South African KAGISO Manufacturing PMI slipped from 54.2 to 47.6. The figure came as a surprise to those forecasting a rise to 54.9. Any figure above the 50.0 benchmark highlights growth, whereas below denotes contraction.
The index marked the first contraction in four months as the sector showed the strain of falling business activity.
British Pound Exchange Rate Forecast: GBP/EUR, GBP/USD, GBP/ZAR, GBP/CNY
The British Pound could be in for more Markit movement on Tuesday with the release of Construction PMI. The index is expected to soften in February from 59.1 to 59.0. However, the stream of Markit data is scheduled to continue on Wednesday with both the Composite and Services PMI out for release.
The Bank of England (BoE) rate decision is due on Thursday.
The British Pound to Euro (GBP/EUR) exchange rate is trading at 1.3744. The British Pound to US Dollar (GBP/USD) exchange rate is reaching 1.5412. The British Pound to Chinese Yuan (GBP/CNY) exchange rate is hovering at 9.6695. The British Pound to South African Rand (GBP/ZAR) is trending in the region of 18.0540.
