Headlines
• GBP/EUR Declines on Dovish BoE
• German IFO Data Beats Forecasts
• US Economic Expansion Accelerates in Q3
• Fed Still on Course for 2015 Rate Hike
GBP/EUR – BoE Chief Economist Andrew Haldane Drives Sterling Lower
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped from its recent three-month high this week to slump to a low of 1.4112.
On Tuesday morning GBP/EUR declined following the Treasury Select Committee meeting in which Bank of England (BoE) Governor Mark Carney and Chief Economist Andrew Haldane were questioned. Known for his dovish outlook, Haldane caused the Pound to dive after he stated that a rate cut was just as likely as a rate hike. Carney was a little more Sterling-supportive by stating that he plans to keep quantitative easing unchanged until the overnight cash rate reaches 2%. Carney also reiterated that when a hiking cycle begins it will be very gradual.
Eurozone data largely impressed on Tuesday and saw the Euro gain versus many of its rivals. The final figures for third-quarter German Gross Domestic Product met with expectations while November’s German IFO Business Climate, Current Assessment and Expectations indexes all bettered forecasts. The reports have helped support European Central Bank (ECB) Executive Board member Sabine Lautenschlaeger’s recent assertions that the Eurozone is showing signs of improvement and that the bank should give current stimulus measures more time to affect changes.
GBP/USD – ‘Cable’ Weakens to 1.50 on Fed Rate Hike Prospects
With an increasing number of investors betting on a December interest rate hike from the Federal Reserve, the US Dollar has found support over the past few days despite mixed domestic data.
Tuesday’s US publications had comparatively little impact with traders focused on the prospect of a near-term rate hike. Quarterly Core Personal Consumption Expenditure met with predictions of 1.3% growth in the third-quarter, but non-core Personal Consumption in the same period missed estimates of 3.2% by printing at 3.0%. Third-quarter Annualised Gross Domestic Product equalled the forecast 2.1% expansion. The acceleration in growth between the second and third quarters was seen to be supportive of a Fed rate hike taking place before the New Year.
USD/GBP – Trending Higher Following BoE Commentary
The US Dollar to Pound Sterling (USD/GBP) exchange rate has spent the last week trending within the range of 0.6522 to 0.6634, with the US Dollar largely holding a position of strength amid expectations that US borrowing costs will rise next month.
The USD/GBP currency pair is currently close to a two-week high following Sterling’s slide over the course of Tuesday’s European session and could extend gains on Wednesday if US Durable Goods Orders data shows the 1.5% increase in October forecast by economists.
EUR/USD – ECB Easing Likely in December but Euro Still Advances
The Euro to US Dollar (EUR/USD) exchange rate was trending within the range of 1.0598 to 1.0758 during Tuesday’s European session.
Although the Euro has found near-term support following positive German ecostats, the gains may prove short-lived. Despite Lautenschlaeger’s hawkish comments that the ECB should hold off from easing policy further, most economists agree that yesterday’s positive Eurozone PMIs will not change policymaker’s minds. Should the ECB ease policy in December and the Federal Reserve tighten, the widening divergence could send the single currency diving versus its peers.
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