GBP/EUR – British Pound Rallies after BoE Minutes Quash Rate Cut Fears
After Chancellor George Osborne delivered a budget statement which showed massive cuts to public spending and a reduction in 2016 and 2017 growth forecasts, the British Pound dived. However, on Thursday GBP exchange rates recovered losses after the publication of minutes pertaining to the Bank of England (BoE) interest rate decision. Whilst the central bank kept interest rates unchanged, as was widely anticipated, the accompanying meeting minutes were far less dovish than feared. Although EU referendum uncertainty will prevent any near-term rate hikes, none of the Monetary Policy Committee members are currently saying that the next move will be a cut.
GBP/USD – Dovish Federal Reserve Weighs on USD Exchange Rates
Of particular significance to market movement this week was the publication of minutes from the Federal Open Market Committee (FOMC) interest rate decision. The minutes showed that policymakers reduced expectations of rate hikes in 2016 to just two thanks to souring global economic conditions and the China-led economic slowdown. Somewhat positive domestic data, which saw manufacturing output climb significantly, has gone some way to reducing USD losses. However, the improvement in risk-appetite following Yuan fixing from the People’s Bank of China (PBoC) continues to pile downside pressure on Dollar exchange rates.
USD/GBP – Forecast to Hold Losses on Market Sentiment
Friday’s data docket is somewhat sparse in terms of influential ecostats. A complete absence of British data will see Sterling movement occur in response to market changes and political developments. There is a high possibility that the Pound will resume depreciation in response to a combination of trader profit taking and ongoing concerns regarding George Osborne’s budget.
There will be several US ecostats, however, with the potential to cause volatility. Of particular significance will be March’s University of Michigan consumer confidence report. Rising sentiment could give the ‘Greenback’ a boost.
EUR/USD – Euro Benefits from Bearish US Dollar
Influential European economic data will be lacking on Friday with only German Producer Price data due for publication. Given the Bank of England’s assurances that it doesn’t intend to adopt negative rates, and with the Federal Reserve showing little sign of changing its stance, the European Central Bank’s (ECB) highly accommodative approach could weigh on demand for the Euro thanks to widening policy divergence. With that said, however, the current weakness of the US Dollar may lend support to the shared currency.