The Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates fell in Friday’s European session before US University of Michigan Confidence data, while the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate remained in a narrow range ahead of Canadian Unemployment Rate and Net Change in Employment figures.
The Pound Sterling exchange rate was offered little support on Friday when UK Construction Output took a rather dramatic tumble in the first half of the European session. The UK construction sector recorded a -3.1% contraction year-on-year in January, a bit of a surprise as economists had forecast a dip from +5.5% to +2.1%.
However, construction data can be extremely volatile and therefore many economists suggest it shouldn’t be given too much weight.
Industry expert Marc Ostwald commented: ‘While there is little doubt that activity in this sector remains robust, this data series is erratic subject to hefty revisions and all too often at odds with other indicators and anecdotal evidence, which is why it was downgraded from an official statistic from last year.’
Greek Negotiations Threaten Euro (EUR) Exchange Rate
Meanwhile, the Euro is trading tentatively while Greek negotiations continue and progress struggles to be made. Amid talks of Greece’s austerity deal, tensions between Greece and Germany have been rising and it appears as if that has become centre stage rather than the actual austerity deal negotiations. So much so, German finance minister Wolfgang Schaeuble suggests that the lack of positive development could lead to a ‘Grexident’ where Greece leaves the Eurozone by accident.
Schaeuble commented: ‘As the responsibility, the possibility to decide what happens only lies with Greece, and because we don’t exactly know what those in charge in Greece are doing, we can’t rule out.’
With a lack of majorly influential Eurozone data out today, the Euro will be extremely sensitive to any changes in global developments, Greek talks, and influential data from other nations such as the US and Canada.
The US Dollar had a slight shock on Thursday when Advance Retail Sales recorded -0.6% contraction in February rather than the 0.3% growth economists had forecast. As a result, the US Dollar exchange rate slipped.
However, the ‘Buck’ may regain strength on Friday with the release of the highly influential University of Michigan Confidence data. The index is expected to rise from 95.4 to 95.7 in March.
The Canadian economy will also join in the significant data releases with the publication of Net Change in Employment and Unemployment Rate stats. The Canadian economy is expected to have seen a drop in employment in February; economists have forecast a decline of -5.0K jobs. As a result, Unemployment Rate is predicted to rise from 6.6% to 6.7%.
Crude oil also declined on Friday—another bad omen for the Canadian commodity currency. Furthermore, the International Energy Agency (IEA) has forecast more oil price volatility in the near future.
The IEA commented: ‘On the face of it the oil price appears to be stabilising. What a precarious balance it is, however.’
Oil prices have tumbled from $115 a barrel to dip below the $50 benchmark in recent months. In addition, the US appears to have large stockpiles amid the global glut. However, in recent weeks crude has rebounded slightly.
The IEA continued: ‘Steep drops in the US rig count have been a key driver of the price rebound. Yet US supply so far shows precious little sign of slowing down.’
‘Production growth continues apace as preliminary crude oil production data through mid-March show but we nonetheless expect to see a supply response in the second half of 2015 due to lower prices and as US crude stocks continue to surge and threaten to test US storage capacity.’
Pound Sterling (GBP/EUR, GBP/USD), GBP/CAD) Exchange Rate Forecast
The Pound Sterling will be in for an exciting day on Wednesday with the release of UK Unemployment Rate, Employment Change and Bank of England Meeting Minutes. The BoE minutes will detail any divergence between policymakers at the latest Monetary Policy Committee (MPC) meeting.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is residing at 1.4828. The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is reaching 1.8884. The Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the region of 1.4006.
