Both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to Indian Rupee (GBP/INR) exchange rates strengthened on Monday.
GBP/EUR Exchange Rate News and Predictions
Sterling put last week’s frankly dismal performance behind it as the week began and managed to advance on almost all of its most-traded currency counterparts.
Less-than-impressive average wage growth figures and some pessimistic comments from the Bank of England in their quarterly inflation report left the Pound floundering towards the close of the week.
It had been hoped that a positive second quarter GDP print for the UK would help to shore up the currency, but even confirmation of the fact that the nation’s economy is now running 0.2% above its pre-crisis peak wasn’t enough to elevate the asset. Quarter-on-quarter expansion of 0.8% was recorded in the second quarter of the year, and the nation posted annual growth of 3.2% (slightly higher than the 3.1% originally estimated).
The fact that the Pound continued trending lower against the Euro on Friday was confirmation of Sterling’s innate weakness as the common currency had come under considerable pressures of its own over the course of the five days.
Shockingly poor ZEW economic sentiment surveys for Germany and the Eurozone as a whole weighed on the Euro early in the week, and the bad news just kept coming. Separate reports detailed an unexpected plunge in the Eurozone’s industrial output while Gross Domestic Product data for the currency bloc, France and Germany indicated that the region’s very tentative economic recovery might already be on the verge of reversing.
The situation in France, the so-called ‘Poor Man of Europe’, is particularly troubling and last week the French Finance Minister Michel Sapin cut his growth forecast for the nation to roughly 0.5% in 2014 – this was half the growth projected earlier I nthe year. While speaking to a local newspaper Sapin commented; ‘Growth has broken down, in Europe and in France. With zero growth in the second quarter, thereby extending the stagnation we saw in the first, our country is slowing down and will not achieve the 1% growth observers were predicting three months ago’.
Even with this troubling turn of events, the Pound to Euro (GBP/EUR) exchange rate approached the weekend trending below 1.25.
However, the Pound was able to advance on the Euro for the first time in four days on Monday after BoE Governor Mark Carney displayed his famous inconsistency and hinted that interest rates might be hiked before average earnings have risen in line with inflation. Although some industry experts have grown dubious of Carney’s frequent changes of heart, his remarks did drive the Pound broadly higher.
The GBP/EUR exchange rate briefly pushed back above 1.25 during the local session, although gains were a little limited as the Eurozone’s trade surplus was shown to have widened by more-than-expected in June.
Today volatility in the Pound to Euro (GBP/EUR) exchange rate could be caused by the UK’s Consumer Price Index and the Eurozone’s current account figures. Signs that the pace of UK inflation is slowing could see the Pound shed recent gains.
Looking further ahead, the publication of minutes from the Bank of England’s latest policy meeting could have a profound impact on the direction taken by the GBP/EUR exchange rate this week.
If the minutes show that even one member of the Monetary Policy Committee voted in favour of increasing interest rates at the last gathering the Pound could surge across the board.
As noted by foreign exchange strategist Jeremy Stretch; ‘The tightening of the labour market, even if we haven’t seen that in wages yet, I think will start to encourage dissent. Signs of that dissent being reflected in the minutes will be enough to probably still encourage Sterling a little bit.’
GBP/INR Exchange Rate News and Predictions
The Pound to Indian Rupee (GBP/INR) exchange rate was also trending in a stronger position on Monday thanks to Carney’s provocative commentary and ongoing geopolitical tensions.
The emerging-market Rupee fluctuated modestly against the US Dollar ahead of the publication of minutes from the Federal Open Market Committee’s last policy decision.
The Rupee managed to adopt a firmer footing against the US Dollar at the close of last week as US retail sales and consumer confidence figures fell short of forecasts.
However, in the opinion of some industry experts the Rupee has the potential to strengthen further in the short to medium term.
According to The Business Line; ‘As mentioned last week, the reversal from the August 8 low of 61.73 is technically very significant for the Rupee. Coupled with the strong close above 61 last week, this adds further strength. The probability is now high for the Rupee to strengthen further to 60.55 and 60.45 […] A reversal from 60.45 will reinforce the danger of a fall to 61.30. On the other hand, a breach of 60.45 could see the Rupee strengthen to 60. In the medium-term, the psychological level of 60 is a key resistance for the Rupee.’
With Indian data lacking for much of the week, movement in the Pound Sterling to Indian Rupee (GBP/INR) exchange rate will be caused by UK data and global developments.
Investors can expect some fluctuations in the Pound Sterling to Euro (GBP/EUR) exchange rate over the next few hours.
UPDATED 16:55 GMT 21 August, 2014
GBP/EUR, GBP/INR Exchange Rates Falter after UK Sales Data
Although the appeal of the Euro was compromised by the Eurozone’s less-than-spectacular set of PMI figures, Germany’s slightly better-than-anticipated Services PMI limited Euro losses and the common currency was able to advance on a faltering Pound.
Sterling trimmed yesterday’s gains following the publication of disappointing UK retail sales figures, easing 0.25% lower against the Euro.
The Pound to Indian Rupee exchange rate also dropped by 0.15% even as the Rupee softened in reaction to increased US rate hike speculation.
With UK data lacking, any volatility in the GBP/EUR and GBP/INR pairings before the weekend will be generated by global economic developments.
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