UPDATE
The Pound Sterling to US Dollar (GBP/USD) and the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rates were trending within a limited range on Wednesday morning.
After the Shanghai Composite Index ended the session down, demand for the Pound slumped. This is due to the recent attempts by Chancellor George Osborne to merge the British equity markets with China’s. Increasing the UK’s exposure to China, at a time when it seems an economic slowdown in the Far East is an inevitability, has seen dampened demand for the British asset.
As traders await US economic data, the ‘Greenback’ (USD) is holding steady versus many of its major peers. Investors are showing reluctance to invest heavily in the US asset after China’s manufacturing activity remained in contraction. This has forced many to fear that the Federal Reserve will look to delay any policy shift until 2016.
Although oil prices strengthened overnight, the Canadian Dollar is also trending statically versus many of its major rivals. This is due to traders awaiting Canadian Retail Sales data. Also, the issues in China will likely impact demand for commodity-correlated and risk-correlated assets.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5332.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trending in the region of 2.0532.
Yesterday…
Pound Sterling to US Dollar (GBP/USD) Conversion Rate Predicted to Soften after Positive US House Price Index
The Pound Sterling to US Dollar (GBP/USD) exchange rate declined by around -0.9% on Tuesday afternoon.
British economic data produced disappointing results on Tuesday which caused the Pound to soften versus nearly all of its most traded currency rivals. Of particular disappointment was August’s Public Sector Net Borrowing which showed government debt rose by 11.3 billion; significantly higher than the market consensus of 8.8 billion. However, the Office for National Statistics stated that the rise in borrowing was the result of late payments to income tax, so it shouldn’t have a lasting detrimental impact on demand for the UK asset.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5363.
After Atlanta Federal Reserve President Dennis Lockhart stated that he believes the Federal Open Market Committee (FOMC) will hike the cash rate within 2015, the US Dollar is holding a position of strength versus its major peers. July’s US House Price Index advanced by 0.6%; bettering the median market forecast 0.4% increase. This aided the US Dollar uptrend.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.5337 to 1.5529 during Tuesday’s European session.
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast to Trend Lower despite Falling Crude Oil Prices
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate cooled by around -0.7% on Tuesday afternoon.
In addition to disappointing finances data weighing on demand for the UK asset, news that Chancellor George Osborne is attempting to merge the Shanghai Composite Index with the UK’s equity markets is weighing on demand. With so much uncertainty regarding the true state of the world’s second-largest economy and with China’s equity market far from stable, many fear that the UK increasing its exposure to the Far East nation is too risky. Speaking to BBC Radio 4’s Today programme, the chancellor said China was a ‘phenomenal part of the world economy’ and ‘a very important part of Britain’s economic future.’
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trending in the region of 2.0401.
Despite the fact that crude prices have tanked and 2015 Federal Reserve interest rate bets have increased, the Canadian Dollar strengthened versus several of its most traded currency competitors. With a complete absence of domestic data to provoke changes, the ‘Loonie’ (CAD) uptrend is likely the result of positive oil futures amid expectations of a drop to the US rig count. Aiding the Canadian Dollar appreciation was comments from Bank of Canada Governor Stephen Poloz who stated that the Canadian economy is far more diversified than traders give it credit, and the economy is not completely reliant upon its natural resources sector. ‘We’re a highly diversified economy and we should be thankful that we’ve got resources as part of our diversification, whereas lots of other countries don’t have that,’ stated Poloz.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within the range of 2.0373 to 2.0561 during Tuesday’s European session.
Pound Sterling (GBP) Exchange Rate Forecast to Hold Losses on Lack of UK Data
Given the absence of further domestic data publications to provoke volatility on Tuesday and with a complete absence of British ecostats on Wednesday, the Pound is likely to hold a weak position versus its major peers. Sterling volatility will be subject to changes in market sentiment and wider currency market movement. In addition, any news regarding the UK’s relationship with China is likely to impact Sterling movement. Friday’s BBA Loans for House Purchase may cause changes for the British asset.
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