Headlines
• British Chamber of Commerce Cuts Growth Forecasts
• GBP Edges Higher ahead of BoE Rate Decision
• German Trade Surplus Widens
• EUR/USD Holds Gains
GBP/EUR – BCC Cuts UK Growth Forecast, GBP/EUR Close to 40-Day Low
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3768 in the early stages of Wednesday’s European session having fallen to a 40-day low on Tuesday.
Whilst the GBP/EUR conversion rate is trending narrowly this morning, the British asset is still holding a comparatively weak position versus the single currency. However, traders won’t be discouraged by the low trade weight given that it may prompt the Bank of England (BoE) into hiking the cash rate ahead of expectations.
Sterling avoided depreciation today despite a report from the British Chamber of Commerce (BCC) which cut growth in response to weak trade and slow manufacturing output. This is partly due to the fact that the Pound is already holding a weak position following recent poor data.
Also preventing a larger Sterling downtrend today is speculation that the Bank of England (BoE) interest rate decision tomorrow will be accompanied by minutes which will prove more hawkish than November’s.
GBP/USD – ‘Cable’ Edges Higher as Investors Eye Fed
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5054 during Wednesday’s European session.
Although the Pound Sterling to US Dollar exchange rate edged higher by around 0.3% on Wednesday morning, the pairing is still holding a comparatively weak position after falling below technical support of 1.50 earlier in the week. Futures traders have now priced in an 80% chance that the Federal Reserve will hike the overnight cash rate next week. However, there is the potential for the US Dollar to extend losses in the lead up to the decision amid concerns that overvaluation will drag on economic growth.
With an absence of influential domestic data today, the US Dollar will likely see movement in response to Euro volatility. Chinese inflation rose beyond predictions which may prevent any significant US Dollar downtrend now that external risks from emerging markets have eased somewhat.
USD/GBP – Trending Higher ahead of Fed Speeches
The US Dollar to Pound Sterling (USD/GBP) exchange rate was trending within the range of 0.6638 to 0.6665 during Wednesday’s European session.
The USD/GBP conversion rate has the potential to see quiet trade today but with traders attempting to weaken the US Dollar ahead of the Fed decision there is the chance for volatility as traders readjust positions.
Thursday is far more likely to see US Dollar to Pound Sterling changes with the Bank of England interest rate decision due. Whilst very few economists expect any policy alterations at this juncture, the accompanying meeting minutes may give a better indication as to policymakers’ outlook.
EUR/USD – Confident Traders see EUR/USD Hold Gains now Fed Tightening has been Priced In
The Euro to US Dollar (EUR/USD) exchange rate advanced by around 0.4% to trend in the region of 1.0938 during Wednesday’s European session.
The single currency continues to hold a strong position versus its peers after the European Central Bank (ECB) made policy less accommodative than traders had priced in.
Given the lack of influential European economic data for the remainder of the week, Euro movement will be most likely occur in response to traders readjusting positions ahead of the Federal Reserve interest rate decision. Should the Fed hike rates, as is greatly expected, the Euro is likely to cool from recent highs.