GBP/EUR and GBP/USD Exchange Rates Soften before BoE Minutes
The expectation that today’s Bank of England (BoE) meeting minutes will contain dovish references to the UK’s inflation outlook saw both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates slide as European trading got underway on Wednesday.
There could be hope for the Pound however. If today’s minutes show that at least two members of the Monetary Policy Committee (MPC) voted in favour of increasing interest rates at the last gathering it could help Sterling recoup some of its recent losses.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Trending Lower as Inflation Accelerates
Although the UK’s Consumer Price Index showed an unexpected acceleration in price gains in October, the Pound Sterling to Euro (GBP/EUR) exchange rate was struggling on Tuesday.
While the Euro was supported by a stronger-than-anticipated increase in German consumer sentiment, demand for the Pound waned as investors bet that the increase in inflation would be a spike in an otherwise downward trend.
The Guardian’s Economics Editor noted; ‘the outlook for late 2014 and early 2015 is as follows: the annual inflation rate will fall in November and continue sliding. The gap between wage growth and inflation will widen, leasing to modest increases in real incomes. Interest rates will remain at 0.5%.
The Pound Sterling to US Dollar (GBP/USD) exchange rate held its previous modest gain after the inflation figures were published.
Before the close of the European session on Tuesday the GBP/EUR exchange rate fell back below 1.25. If tomorrow’s BoE minutes fail to show a divide among policymakers on the subject of interest rate increases, the Pound could fall to a fresh low against its European counterpart.
Earlier…
Pound Sterling to Euro (GBP/EUR) Exchange Rate Movement Expected after CPI
The Pound Sterling to Euro (GBP/EUR) exchange rate managed to claw its way back above 1.25 before the close of trade but the pairing has since shed 0.2% on the expectation that the UK’s Consumer Price Index will show near-stagnant consumer price gains.
Of course, the GBP/EUR pairing could also fluctuate today off the back of the German and Eurozone ZEW economic sentiment surveys.
The German gauge of confidence is expected to advance from -3.6 to 0.5. The German current situation survey is also expected to show improvement. If that proves to be the case it could give the Euro a boost and push the Pound to fresh multi-week lows.
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Dovish Draghi helps Pound Sterling to Euro Exchange Rate Gain
The Pound Sterling to Euro (GBP/EUR) exchange rate was able to stage a modest rebound following European Central Bank (ECB) President Mario Draghi’s quarterly testimony to lawmakers.
While speaking at the European Parliament, Draghi gave yet another strong hint that the ECB intends to shore up the Eurozone’s flagging economy with additional stimulus.
Draghi stated: ‘Other unconventional measures might entail the purchase of a variety of assets, one of which is sovereign bonds.’
The Euro posted widespread declines in response to Draghi’s remarks and the Pound was able to benefit, recovering from the below 1.25 low struck earlier in the day.
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GBP/EUR Briefly Falls below 1.25, GBP/USD Extends Losses
The Pound Sterling to Euro (GBP/EUR) exchange rate drifted below 1.25 on Monday as the Bank of England’s (BoE) dovish inflation report continued to undermine demand for the Pound.
The Pound also extended declines against the US Dollar (GBP/USD) over the course of the European session.
In the opinion of strategist Nick Stamenkovic; ‘The BoE is clearly in no hurry to raise interest rates, given downside risks posed by some of the country’s trade partners. A surprise fall in Japanese third-quarter GDP spooked risk markets, supporting core government bonds, including gilts.’
However, the Pound Sterling to Euro (GBP/EUR) exchange rate later recouped its initial declines.
Earlier…
Pound Sterling to Euro (GBP/EUR) Exchange Rate Softens
The Pound Sterling to Euro (GBP/EUR) exchange rate continued trading in a weaker position on Monday as the Eurozone’s trade surplus was shown to have widened to a record level of 17.7 billion Euros in September thanks to a surge in exports.
The weaker Euro exchange rate also contributed to the improved trade figures.
Euro gains were limited ahead of European Central Bank President Mario Draghi’s speech in Brussels.
Earlier…
The Pound Sterling to Euro (GBP/EUR) and Pound Sterling US Dollar (GBP/USD) exchange rates posted considerable declines last week, but what are the currency pairings forecast to do for the week ahead?
The GBP/EUR exchange rate dropped by the most for 20 months as investors responded to the Bank of England’s (BoE) inflation report.
The BoE’s decision to revise inflation forecasts pushed back rate hike expectations to the end of 2015 and undermined demand for the Pound. Over the course of the week the GBP/EUR exchange rate shed 1.8%, falling below the 1.26 level to trend around 1.2508.
In its report the BoE said of inflation; ‘The low level of inflation in part reflects global developments: commodity prices have fallen and import prices more broadly have declined following the previous appreciation in the sterling exchange rate. But domestic price pressures – in particular – unit labour cost growth – also remain low.’
As well as falling against the Euro, the Pound slid against the US Dollar with the Pound Sterling to US Dollar (GBP/USD) exchange rate shedding 1.3% and hitting a 14-month low.
The expectation that next week’s UK Consumer Price Index will show that the pace of consumer price gains hovered around a five-year low in October also kept the Pound depressed.
In the view of forex strategist Peter Frank; ‘While we’ve seen some improvements in the cyclical economic picture, there remain a number of structural challenges in the UK economy. The market is too optimistic about the UK growth outlook. We see the Pound as overvalued.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate to Trend Lower
The GBP/EUR exchange rate is likely to hold losses into the beginning of next week as influential European ecostats are in short supply.
Positive trade balance figures for the Eurozone could have an impact, but investors will be looking ahead to Tuesday’s UK Consumer Price Index. Annual inflation came in at 1.2% in September.
Remarks made by the Bank of England’s Chief Economist, Andy Haldane, added to inflation concerns over the weekend.
In the text of a speech due to be given on Monday, Haldane stated;’Even in the UK, some measures of household inflation expectations have fallen slightly over the course of this year. Wearing my Monetary Policy Committee hat, and with UK inflation already below target, this is something I am watching like a dove.’
If the pace of consumer price gains fails to accelerate beyond this, it will support the Bank of England’s belief that CPI could fall below 1% and may trigger further Pound weakness.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate May Extend Declines
The GBP/USD exchange rate may remain bearish over the course of next week. It would take impressive UK inflation data on Tuesday for Sterling to break away from its current lows.
That being said, minutes from the latest BoE and Federal Open Market Committee (FOMC) policy meetings are due to be published this week, and both reports could have a profound impact on the Pound Sterling to US Dollar (GBP/USD) exchange rate.
Stay tuned for the latest Pound Sterling (GBP) exchange rate news and GBP/EUR, GBP/USD currency forecasts.
The GBP/EUR exchange rate continued trending lower on Monday despite comments issued by UK Prime Minister David Cameron.
Cameron stated; ‘The Eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too. Emerging market economies which were the driver of growth in the early stages of the recovery are now slowing down. Despite the progress in Bali, global trade talks have stalled while the epidemic of Ebola, conflict in the Middle East and Russia’s illegal actions in Ukraine are all adding a dangerous backdrop of instability and uncertainty.’
