GBP/EUR – British Pound Advances on Better-than-Expected Data
The Pound Sterling to Euro exchange rate rallied by around 0.5% on Wednesday afternoon after British data bettered expectations. January’s UK Services PMI was forecast to tick fractionally lower from 55.5 to 55.4, but the actual result reached 55.6. This, combined with positive factory output growth, saw January’s British Composite PMI advance from 55.3 to 56.1 despite weak construction growth. The main focus for Sterling traders this week will be the Bank of England’s (BoE) ‘Super Thursday’ in which the interest rate decision will be accompanied by the publication of meeting minutes and the inflation report. Governor Mark Carney will be giving a speech following the ecostats which will be closely scrutinised by traders. There will be several influential British economic data releases due for publication next week, including Tuesday’s Trade Balance and Wednesday’s Manufacturing and Industrial Production reports.
GBP/USD – ‘Cable’ Rallies on Improved Market Sentiment
The Pound Sterling to US Dollar exchange rate rallied by around 1.0% on Wednesday afternoon after positive data out of China supported demand for high-yielding assets and reduced the appeal of the safe-haven US Dollar. Even a positive result from January’s ADP Employment Change, which saw 205,000 newly employed, wasn’t enough to provoke a US Dollar reversal. Tomorrow should see significant ‘Greenback’ (USD) volatility in response to labour market data and factory orders reports. Friday’s Trade Balance, Non-Farm Payrolls and Unemployment Rate data will be hugely significant as the Federal Reserve will use the data to gauge the timing of future rate hikes.
USD/GBP – Forecast to Strengthen on BoE Rate Announcement
With mounting uncertainty as to how Bank of England (BoE) policymakers will approach interest rates tomorrow, with some analysts going so far as to predict a rate cut, USD/GBP exchange rate movement will hinge on the decision. Market sentiment will also play a large part in the conversion rate, with investors eyeing proceedings in China. With China on a week-long break for Lunar New Year next week, however, there is a chance that the USD will depreciate as risk-appetite improves.
EUR/USD – Euro Forecast to Extend Losses on ECB Easing Speculation
The Euro to US Dollar exchange rate strengthened on Wednesday despite weaker-than-anticipated Eurozone services growth. However, the common currency is holding losses versus most of its major peers after output prices dropped to their lowest level since March 2015. This will pressure the European Central Bank (ECB) into easing monetary policy further as the inflation target looks increasingly difficult to hit.