The Pound Sterling to Euro (GBP/EUR), Pound Sterling to Euro (GBP/EUR) and Pound Sterling to Canadian Dollar (GBP/CAD) exchange rates all softened in the first half of Wednesday’s European trading as the UK general election cast doubts.
Earlier… The Pound Sterling to Euro (GBP/EUR) exchange rate was trending lower in the second half of Monday’s European session while the Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Canadian Dollar (GBP/CAD) exchange rates climbed after US Manufacturing Production disappointed, and crude oil prices tumbled further to only $44 per barrel.
US Manufacturing Production contracted by -0.2% in the month of February after January’s -0.3% dip.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in a narrow range on Monday while the Pound Sterling to Canadian Dollar (GBP/CAD) and Pound Sterling to US Dollar (GBP/USD) exchange rates climbed ahead of US Industrial Production and Manufacturing Production figures as well as the NAHB Housing Market Index.
The Pound Sterling exchange rate advanced in Monday’s European session despite UK Rightmove House Prices falling on the year from 6.6% to 5.4% as general election fears begin to heighten.
This week will be a big week for central bank action from the European Central Bank (ECB), Bank of England (BoE) and the US Federal Reserve.
ECB QE Announcement and President Draghi Press Conference to Influence EUR/GBP
Monday is scheduled to see the ECB announce its latest quantitative easing (QE) purchases, followed by a press conference with ECB President Mario Draghi. In the past, the central banker has caused havoc in the Euro to British Pound (EUR/GBP) exchange rate by speaking about the Eurozone.
However, the Eurozone is currently on the precipice of a potential breakup with Greek negotiations failing to progress.
Monday is forecast to see Greece pay another €600m to the International Monetary Fund (IMF), pushing the Greek economy further into dangerous financial territory.
Federal Open Market Committee Rate Decision Forecast to Cause USD/GBP, USD/EUR, USD/CAD Movement
Meanwhile, the US Dollar is in for a wild ride this week with the Federal Open Market Committee (FOMC) announcing its latest interest rate decision on Wednesday. Investors have forecast the board of policymakers will maintain the current 0.25% interest rate as they previously stated a period of stability in rates would be favourable.
Industry expert Stan Shamu commented: ‘This meeting will see the Fed update its economic and financial forecasts (summary of economic projections); and will also bring the dot plot analysis.’
‘These will be released along with a statement and the key here is whether the updated forecasts will give the Fed room to adjust its language regarding rates lift off. Hawkish members such as Mr [James] Bullard have suggested the Fed should remove the ‘patient’ reference at the March meeting.’
The Fed implemented a small language change several months ago when it suggested policymakers would be ‘patient’ before hiking interest rates, as opposed to suggesting borrowing costs would remain low for a ‘considerable time’.
Shamu continued: ‘Some analysts expect the language to be adjusted so as to allow flexibility to raise interest rates sometime around the middle of the year.’
As speculation regarding the possibility of a Federal Reserve rate hike has increased, the US Dollar to Euro (USD/EUR) exchange rate has traded at near 12-year highs.
Bank of England (BoE) Meeting Minutes to Affect GBP/USD, GBP/EUR, GBP/CAD
The Bank of England (BoE) will also have its part in foreign exchange market movement this week with Wednesday seeing the central bank release its latest meeting minutes.
BoE Governor Mark Carney, dubbed the ‘unreliable boyfriend’ by the markets, pulled his usual trick of contradicting himself last week in two different speeches. The first announcement saw the central banker suggest interest rates would rise in the near future and the BoE would look through lower inflation and hike rates anyway. However, the second meeting saw Carney suggest that global deflation may now play a part in delaying borrowing cost increases.
The Bank of Canada (BOC) will release its Consumer Price Index (CPI) on Friday which will detail the level of inflation in the North American nation. However, a more immediate concern for the Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate came in the form of oil prices tanking to six-year lows.
West Texas Intermediate slipped to $44.45 per barrel on Monday morning, falling by around 2.8% as hypotheses emerged that the record high US supply could weigh on storage capabilities.
Danske Bank commodities analyst Jens Naervig commented: ‘It looks like we have a temporary glut within the glut. Weak demand, moderate economic growth and a stronger Dollar cannot keep pace with production, which continues to look relatively strong. Consequently, inventories are moving closer to capacity.’
Pound Sterling Exchange Rate Forecast: GBP/EUR, GBP/USD, GBP/CAD
The Pound Sterling to US Dollar (GBP/USD), Pound Sterling to Euro (GBP/EUR) and Pound Sterling to Canadian Dollar (GBP/CAD) exchange rates could all be in for an influential day on Wednesday with UK Unemployment Rate and Employment Change stats due to emerge.
In addition, much of the GBP/USD, GBP/EUR and GBP/CAD movement could occur from speculation over central bank rate hikes, as well as any global developments.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading at 1.4788. The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is reaching 1.8872. The Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the region of 1.4040.
