- Market Sentiment Dominates Currency Trading
- Sterling Struggles on Delayed BoE Rate Hike Bets
- Euro Forecast to Gain on Carry Trade Demand
- US Dollar May Soften ahead of Fed Rate Decision
GBP/EUR – Pound Falls Below 1.30
After slumping to an over one-year low of 1.29, the Pound Sterling to Euro (GBP/EUR) exchange rate firmed slightly on Wednesday after British data produced a mixed bag of results. Whilst unemployment dropped to its lowest level in a decade, wage growth accelerated at a pace well below the market consensus. Although there will be a number of British ecostats over the next week with the potential to provoke Sterling volatility, there is a high chance that the Pound will continue to struggle. This is due to concerns that the Bank of England (BoE) will look to delay a benchmark interest rate hike for the foreseeable future following dovish comments from BoE Governor Mark Carney. In addition, the slower-than-expected pace of wage growth will likely dampen policymaker’s enthusiasm for higher borrowing costs.
GBP/USD – ‘Cable’ Hits Lowest Levels since 2009
The Pound Sterling to US Dollar exchange rate was also trending narrowly following mixed data from the UK, with GBP/USD having previously dipped to its worst level for seven years. US data has also produced varied results and a smaller-than-anticipated rise in December’s domestic inflation has prevented significant US Dollar appreciation. Euro strength is also having a marked impact on the US asset. Tomorrow’s European Central Bank (ECB) interest rate decision, therefore, is likely to provoke US Dollar volatility. Friday’s speech from ECB President Mario Draghi may also impact US Dollar movement.
USD/GBP – Could Fluctuate on Fed Rate Announcement
With market sentiment damp in the face of China’s economic woes, demand for safe-haven assets has supported the US Dollar. However, the poor state of the global economy could prove to be a stumbling block for Federal Reserve policymakers with regards to policy outlook. With that in mind, there is a chance that the US Dollar will edge lower over the coming days as traders prepare for next week’s Fed interest rate decision. Prior to this, Thursday’s ECB interest rate decision has the potential to stimulate market volatility and cause changes for the GBP/USD pairing.
EUR/USD – Euro Resilient ahead of ECB Rate Decision
The Euro avoided depreciation on Wednesday despite weak German Producer Price data thanks to speculation that the ECB will avoid introducing additional stimulus measures during tomorrow’s gathering. If the ECB does leave policy unchanged, the EUR/USD conversion rate may surge. Even if European economic data prints poorly over the coming week the Euro may continue performing well as investors conduct carry trades amid a period of economic turmoil and volatile global stock values.