GBP/EUR – Holds Strong Position but Ticks Fractionally Lower on Mixed UK Data
In recent weeks the Pound Sterling to Euro (GBP/EUR) exchange rate advanced considerably. The Pound’s appreciation was the result of a sustained relief rally amid easing ‘Brexit’ concerns. The latest opinion polls suggest that the UK will vote to remain a member of the EU on June 23rd. However, the GBP/EUR exchange rate softened a little on Wednesday following less-than-ideal British ecostats. Of particular disappointment was 1st quarter Gross Domestic Product which showed a quarterly growth of just 0.4%. Those campaigning for the UK to remain in the EU have highlighted this slow pace of growth as a direct result of ‘Brexit’ uncertainty.
GBP/USD – US Dollar Struggles ahead of FOMC Rate Decision
Later during the North American session the Federal Open Market Committee (FOMC) interest rate decision will be announced. Whilst very few economists expect any changes to policy at this time, a number of analysts predict that the accompanying press conference will be dovish in tone. Should Fed Chairwoman Janet Yellen reiterate the need to be extremely cautious in the face of external risks, the US Dollar could fall further.
USD/GBP – US GDP to Provoke Changes
The USD/GBP exchange rate will be subject to volatility in response to the FOMC rate decision. However, even if Fed policymakers are surprisingly hawkish, the US Dollar is unlikely to recover recent losses versus the Pound swiftly. With an absence of British ecostats on Thursday, the UK Pound will continue to see movement in response to political developments. The USD/GBP exchange rate is likely to see heightened volatility in response to key US data publications however, including Gross Domestic Product and Personal Consumption reports.
EUR/USD – FOMC Rate Decision to Dictate Movement
Whilst the Euro has made small gains on Wednesday, after domestic data showed that German Consumer Confidence trumped expectations, there is a high chance that the uptrend will be short-lived. This is because deflation concerns in the Euro-area persist, with many analysts forecasting additional stimulus measures to be employed by the European Central Bank (ECB) during 2016.
With that said, however, if the US Dollar dives in response to the FOMC rate decision, negative EUR/USD exchange rate correlation will likely provide a boost to the single currency.
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