GBP/EUR – Steady Second Quarter GDP Forecast to Boost Confidence
Post-referendum data continued to surprise to the upside over the course of the last week, with July’s Retail Sales figure smashing forecasts to climb from 3.9% to 5.4% on the year. This suggested that uncertainty surrounding the Brexit issue had not had an overly negative impact on confidence, encouraging investors to pile into the Pound. The GBP/EUR exchange rate could extend its recent gains further if the second estimate of the Q2 UK GDP shows no change, with the measure having already pointed towards robust growth. Nevertheless, worries over the outlook of the domestic economy are likely to remain a downside influence on Sterling.
GBP/USD – Weaker Mortgage Data Failed to Dent Pound Uptrend
Even though the BBA Loans for House Purchase figure showed that mortgage approvals weakened further than forecast in July this failed to knock the buoyant Pound on Wednesday morning. As the Bank of England’s (BoE) quantitative easing scheme has proceeded smoothly after its first hiccup, markets have continued to favour Sterling over its rivals, despite expectations of further easing. Any suggestions that policymakers could lower interest rates again sooner rather than later could well weigh on the Pound in coming days, even if weaker domestic data does not have so much of an impact on sentiment.
USD/GBP – Fed Rate Hike Speculation to Heighten ahead of Yellen Speech
Confidence in the US Dollar has weakened generally thanks to some unimpressive domestic data, with signs of weakness in the manufacturing sector increasing doubts over the odds of an imminent Fed rate hike. Despite the hawkishness of recent policymaker commentary, investors await a speech from Fed Chair Janet Yellen at the Jackson Hole Symposium on Friday. Markets are hopeful for some further indication as to the central bank’s policy outlook, with any potential indications of a more imminent return to monetary tightening likely to boost the ‘Greenback’ across the board.
EUR/USD – Slowness in German Economy Weighs on Euro
Signals from the Eurozone have been somewhat mixed, meanwhile, with the French economy appearing to pick up even as Germany shows signs of slowing. There are concerns that investment in the German economy has been falling, with consumers becoming an increasingly major driver of growth within the Eurozone’s powerhouse. Upcoming German consumer and business confidence surveys could offer the EUR/USD exchange rate a fresh rallying point assuming that sentiment is shown to have improved on the month. Nevertheless, if the Fed indicates greater willingness to hike interest rates then the Euro is likely to weaken in response.