Headlines
• Quiet Trade towards Year-End
• GBP Edges Fractionally Higher on 8-Month High House Price Growth
• Euro Steady despite Slower-than-Expected Eurozone Money Supply Growth
• US Dollar Holds Strong Position on Improved 2016 Fed Rate Hike Bets
GBP/EUR – Pound Holds Steady against the Euro despite 8-Month High British House Price Growth
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a limited range on Wednesday despite the fact that the solitary British data publication this week printed positively. December’s Nationwide House Prices was predicted to advance by 3.8% on the year, but the actual result accelerated to 4.5% annual house price growth. On a monthly basis, Nationwide House Prices advanced by 0.8% in December, bettering the median market forecast 0.4%. Nationwide analysts predict that housing prices will continue to rise in 2016 with improving labour market conditions seeing heightened demand.
GBP/USD – ‘Cable’ Holds Weak Position after US Consumer Confidence Bettered Estimates
On Tuesday the US Dollar rose to a fresh 8-month high against the Pound after better-than-expected North American economic data bolstered ‘Greenback’ (USD) appeal. Of particular significance was December’s Consumer Confidence report which eclipsed the market consensus of a rise from 92.6 to 93.5, with the actual result accelerating to 96.5. The US asset continues to hold a position of strength versus its major peers into 2016 as trader expectations regarding the number of Federal Reserve cash rate hikes have improved lately.
USD/GBP – Trending Narrowly on ‘Brexit’ Concerns
One of the major Sterling headwinds to emerge as we approach 2016 is the forthcoming referendum on the UK’s membership in the European Union. Although originally scheduled for 2016, there is the potential that British Prime Minister David Cameron will want to have the referendum earlier should he fail to make strides in his demands for reforms. Uncertainty regarding the outcome and the potential ramifications of a British exit from the European Union is likely to weigh on investor sentiment. This could also cause the Bank of England (BoE) to delay a benchmark interest rate hike which would widen policy divergence between the BoE and the Federal Reserve.
EUR/USD – Euro Softens after German IFO Data Disappoints
Although Wednesday’s solitary European economic data publication failed to meet with expectations, the single currency avoided depreciation. This can be linked to speculation that the European Central Bank (ECB) will avoid expanding monetary stimulus with inflation showing signs of making a recovery. November’s annual Eurozone M3, which is the broadest measure of money supply in use by Eurozone nations, failed to meet with the median market forecast 5.2% growth with the actual result only reaching 5.1%.