Pound Sterling (GBP) Exchange Rate Fluctuates after BoE Comments
While the Pound Sterling (GBP) exchange rate began the week trending higher against several of its peers thanks to hawkish comments from Bank of England policymaker Ian McCafferty, a different perspective has since seen the currency decline.
The appeal of the Pound was compromised during the European session after BoE Deputy Governor Minouche Shafik asserted that the level of slack in the UK’s employment sector and the lack of domestic price pressures support the case for leaving interest rates on hold for some time to come.
She noted that before borrowing costs were to increase; ‘We would need to see more of the data pointing in the same direction in terms of price pressures – particularly in terms of wages and unit labour costs’.
A lack of UK data restrained further Pound movement, although the currency was able to advance on the US Dollar following the publication of mixed domestic data.
The GBP/EUR exchange rate is currently trending in the region of 1.2689
US Dollar (USD) Exchange Rate Trends Lower as Durable Goods Drop
On Monday the US Dollar (USD) exchange rate came under pressure following an unexpectedly steep decline in the US Markit Services PMI.
The ‘Greenback’s bearish run continued on Tuesday after the US published more mixed reports ahead of the Federal Open Market Committee’s interest rate decision.
US Durable Goods Orders had been expected to increase by 0.5% on the month in September following the negatively revised decline of -18.3% in August.
However, goods orders actually fell by a further -1.3%.
Durable goods excluding transportation fell by -0.2% in September instead of climbing the 0.5% expected.
It wasn’t all bad news however as the US Consumer Confidence Index unexpectedly surged from a revised 89 to 94.5 in October. A reading of 87 had been anticipated. The reading was a seven-year high and prompted this response from economist Chris Rupkey; ‘The consumer really has the wind at their backs. The consumer at his point seems to have the wherewithal to power the economy forward.’
Expectations that the recent run of below-forecast US news might prevent the Federal Reserve from bringing its quantitative easing programme to an end this week saw the US Dollar soften against peers like the Pound, Euro and Australian Dollar.
The US Dollar to Pound Sterling (USD/GBP) exchange rate is currently trending in the region of 0.6184
Euro (EUR) Exchange Rate Mixed before CPI
With the Eurozone’s most influential economic reports still to come, the Euro was able to advance on a broadly softer US Dollar (EUR/USD) and hold its own against a fluctuating Pound (EUR/GBP).
The common currency found some support early in the European session as the German Import Price Index registered an unexpected increase in September. The measure was up 0.3% on the month even though a -0.1% decline had been forecast.
A year-on-year reading of -1.9% had been expected but the index actually improved to -1.6%.
As Tuesday progressed the Euro benefited from some below-forecast US data and the EUR/USD exchange rate was able to strengthen by 0.3%.
While tomorrow is quiet in terms of economic reports for the Eurozone, plenty of Euro volatility could be on the cards on Thursday.
Germany will be releasing its unemployment rate and inflation data while the Eurozone will publish final consumer/economic/industrial/services confidence indexes.
If the pace of consumer price growth is shown to have slowed in October it would put more pressure on the European Central Bank to roll out full scale quantitative easing measures and could push the Euro lower across the board.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.2743
Indian Rupee (INR) Supported by Fed Rate Bets
With below-forecast US data upping the odds of the Federal Reserve delaying its plans to increase interest rates, higher risk currencies like the Indian Rupee (INR) were boosted on Tuesday.
Given that the US services and durable goods orders reports fell short of expected levels, the Fed may even opt to delay the ending of its quantitative easing programme. The central bank is expected to wind up its QE scheme on Wednesday, but postponing would be beneficial to currencies like the Rupee.
Movement in the GBP/INR pairing was limited on Tuesday due to a lack of influential data from either the UK or India.
The Pound Sterling to Indian Rupee (GBP/INR) exchange rate is currently trending in the region of 98.8560.
