On Wednesday the Pound to Euro (GBP/EUR) pairing was holding steady and the Pound to US Dollar (GBP/USD) pairing was trading in the region of a 4 ½ year high.
Yesterday the Pound advanced on the majority of its currency counterparts thanks to surprisingly strong domestic services data. The impressive expansion in the service sector added to expectations that recent upbeat UK reports will push the Bank of England into introducing a rate increase earlier than currently planned and gave Sterling a boost.
The British currency managed to retain gains against several of its rivals even as the UK’s shop price index declined by more-than-expected.
The gauge compiled by the British Retail Consortium slipped by 0.5 per cent month-on-month in April and 1.4 per cent year-on-year.
Economists had envisaged an annual decline of 0.8 per cent.
This marks a 12 consecutive month of falling shop prices and is one of the steepest declines on record.
In the view of industry expert Mike Watkins; ‘Over the last six months we have seen shop prices falling and in recent weeks stabilising. Whilst consumer confidence is slowly improving, shoppers remain cautious. So retailers are holding back on price increases wherever possible’.
A lack of additional UK data could restrain Pound movement as the day continues, although investors will be looking ahead to tomorrow and the Bank of England’s rate decision.
The GBP to Euro pairing was little changed after a report showed an unexpected slump in German factory orders. Economists had projected a 0.3 per cent month-on-month increase in March, but seasonally adjusted factory orders actually fell by 2.8 per cent.
On the year non-seasonally adjusted factory orders were up 1.5 per cent versus expectations for a reading of 4.3 per cent.
There was more disappointing data for the Eurozone as Germany’s Markit Construction PMI dropped from 52.5 to 49.7 in April, below the 50 mark separating growth from contraction.
However, Euro declines were limited and the common currency continues to derive underlying support from the belief that the European Central Bank will refrain from introducing any additional stimulus when it meets tomorrow.
The Pound was also stronger against the ‘Aussie’ and ‘Kiwi’ in light of disappointing Australian retail sales and New Zealand employment reports.
The Pound to US Dollar (GBP/USD) pairing may experience volatility later today as Federal Reserve Chairwoman Janet Yellen delivers a testimony to the Joint Economic Committee.
If Yellen’s testimony is on the dovish side, as some industry experts anticipate, the Pound could consolidate and extend yesterday’s gains against its US peer.
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,1.6971,
Pound Sterling,,Euro,1.2191,
Pound Sterling,,Australian Dollar,1.8167,
Pound Sterling,,New Zealand Dollar,1.9520,
US Dollar,,Pound Sterling,0.5893,
Euro,,Pound Sterling,0.8203,
Australian Dollar,,Pound Sterling,0.5504,
New Zealand Dollar,,Pound Sterling,0.5121,
[/table]
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