GBP/EUR – British Pound Forecast to Soften on Dovish BoE, ‘Brexit’ Uncertainty
Following last week’s largely poor performance, which saw the Pound Sterling to Euro exchange rate hit a one-year low, GBP/EUR extended declines on Wednesday. Below-forecast domestic data was partly responsible for the Pound’s losses. Nationwide House Prices failed to meet with expectations of 4.7% in January, with the actual result only at 4.4%. January’s Nationwide House Prices also failed to meet with the forecast 0.6% growth on the month, with the actual result coming in at 0.3%. In addition, December’s BBA Mortgage Approvals hit 43,980 which was well below the forecast 45,500. The coming week is likely to see significant Sterling volatility with a number of domestic ecostats due for publication. Thursday’s fourth-quarter Gross Domestic Product will be the main focus for Sterling traders. Friday’s UK Consumer Confidence, Monday’s Manufacturing PMI, Tuesday’s Construction PMI and Wednesday’s Services PMI will all be significant for those invested in the British Pound.
GBP/USD – ‘Cable’ Extends Losses ahead of FOMC Interest Rate Decision
The Pound Sterling to US Dollar exchange rate continues to trend in the region of a seven-year low this week despite USD fluctuating in response to market sensitivity ahead of the upcoming US interest rate announcement. Market focus today has been dominated by the forthcoming Federal Open Market Committee (FOMC) interest rate decision. Whilst the Fed are not expected to move on rates at this time, many hawks are hoping that policymakers will be looking to March for another benchmark interest rate hike. There will be a number of influential domestic data publications over the coming week with the potential to provoke US Dollar volatility. Thursday’s Durable Goods Orders, Friday’s fourth-quarter GDP and next week’s ISM Manufacturing PMI, ADP Employment Change and ISM Non-Manufacturing PMI will all be closely watched by US Dollar traders.
USD/GBP – Forecast to Strengthen on Fed Interest Rate Announcement
Unless there is a major surprise or the Fed is particularly dovish, the US Dollar to Pound Sterling exchange rate is likely to strengthen following the FOMC announcement given forecasts for Fed inaction. This is due to market sentiment remaining considerably damp with stock market volatility causing large forex swings. Thursday is far more likely to see USD/GBP volatility, however, with British fourth quarter GDP due for publication and US Durable Goods Orders set for release.
EUR/USD – Euro Gains may be Short-Lived on ECB Easing Speculation
The Euro to US Dollar exchange rate edged higher on Wednesday following positive German, French and Italian Consumer Confidence reports. However, mounting speculation that the European Central Bank (ECB) will look to ease policy in March is likely to see the single currency soften as the week progresses. The rapid decline in oil prices has not helped Eurozone inflation, so Thursday’s German Consumer Price Index and Friday’s Eurozone inflation data will be closely watched by traders. Monday’s Eurozone and German Manufacturing PMIs, Tuesday’s Eurozone Unemployment Rate and Wednesday’s Eurozone and German Composite/Services PMIs will all have the potential to provoke Euro volatility.