Although the Pound has come away from the highs recorded last week, the GBP to Euro exchange rate remains close to a 20-month high while the GBP to US Dollar exchange rate remains in the region of an over 5-year high.
Last week’s Bank of England meeting minutes were a little tamer than many investors would have liked, but the hawkish tone of the comments being made by several prominent BoE officials were enough to offset any disappointment and keep the Pound exchange rate riding high.
With some industry experts and Bloomberg News dubbing the Pound the most ‘coveted currency among traders’ it’s little wonder that the asset has retained its recent strength in the face of sub-par UK fundamentals, including last week’s 0.5 per cent decline in UK retail sales and the Consumer Price Inflation report showing that inflation came in at its lowest levels for over four years.
On Monday a notable lack of economic reports for the UK did put some restraints on the Pound.
That being said, global economic developments helped the British asset eke out a very modest gain against the Euro and hold steady against the US Dollar.
Although hopes that the BoE will bring in a rate hike before the close of 2014 are keeping the Pound buoyed, concerns that the currency has been overbought took some of the wind out of Sterling’s sails. As did the expectation that this week’s UK growth data will show that the UK economy expanded by 0.8 per cent in the first quarter of the year, slightly less than originally forecast.
In the view of foreign exchange strategist John Hardy; ‘The market could have taken Sterling too far here. There could be a washout on long positions and rate spreads have done nothing since the Carney speech. I’m wondering if we go back to higher on the Dollar’.
While the ‘Greenback’ was boosted on Monday by a stronger-than-anticipated US Manufacturing PMI and existing home sales report, the Euro came under pressure as Manufacturing and Services PMI for the Eurozone and its largest economies fell short of forecasts.
The US Dollar could push higher against the Pound before the close of the North American session.
However, considerable Pound to US Dollar (GBP/USD) and Pound to Euro (GBP/EUR) exchange rate movement could be inspired by tomorrow’s UK BBA Loans for House Purchase data, speeches from BoE officials including Mark Carney, Charlie Bean and David Miles, German IFO business climate figures and US consumer confidence data.
Updated 09:40 24 January 2014
With Bank of England officials, including the central bank’s Governor, due to issue comments later today speculation surrounding the prospect of UK interest rate increases could mount. If the policy makers make any additional hints regarding hiking borrowing costs before the end of the year the GBP/EUR and GBP/USD exchange rates could climb.
Already today UK data has shown an increase in BBA Loans for House Purchases in May. As concerns regarding the ‘overheating’ UK housing market are having a direct impact on domestic fiscal policy, the data could add to the case for rising interest rates and boost the Pound exchange rate as the day continues.
Updated 15:10 GMT 24 June 2014
While the Pound plummeted against its peers in the immediate aftermath of Bank of England Governor Mark Carney’s surprisingly dovish comments being publicised, Sterling rebounded from its lowest level of 1.6969 against the US Dollar as the European session continued. The GBP to US Dollar exchange rate was down 0.30% in the wake of Carney’s hints that (contrary to his previous assertions) interest rates wouldn’t be increased in the near future.
The GBP to Euro exchange rate was also 0.28% softer.
During the North American session the GBP to US Dollar exchange rate held earlier declines as the US Consumer Confidence index surged unexpectedly. The measure of sentiment jumped from a negatively revised 82.2 in May to 85.2 in June as labour market conditions improved and the US housing market showed signs of resilience. US New Home Sales also climbed by more than expected, although the Richmond Fed Manufacturing Index tumbled from 7 to 3 this month.
The GBP to US Dollar and GBP to Euro exchange rates are likely to remain in a weaker position overnight.
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,1.7011,
Pound Sterling,,Euro,1.2523,
Pound Sterling,,Australian Dollar,1.8049,
Pound Sterling,,New Zealand Dollar,1.9486,
US Dollar,,Pound Sterling,0.5881,
Euro,,Pound Sterling,0.7987,
Australian Dollar,,Pound Sterling,0.5542,
New Zealand Dollar,,Pound Sterling,0.5127,
[/table]
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