GBP/EUR – Wage Growth Faltered ahead of Inflation Data
Growth in UK average weekly earnings were found to have slowed further than forecast in the three months to January, clocking in at 2.2% rather than 2.6%. This disappointing showing suggests that consumers are likely to experience a greater squeeze in the coming months. With inflation expected to continue to pick up for some time to come, investors have seen little particular cause for confidence in the Pound. If the Bank of England (BoE) maintains a relatively cautious view on the economy and monetary policy at its March meeting, GBP EUR could be pushed towards fresh multi-week lows.
GBP/USD – Scottish Referendum Worries Impact Pound
The Pound was knocked after parliament approved the government’s Article 50 bill without any amendment. Market nervousness increased as the way was cleared for Theresa May to trigger the start of formal exit proceedings from the EU. As Nicola Sturgeon was quick to announce her intention to run a second referendum on Scottish independence, the sense of political uncertainty looming over the UK economy only intensified. GBP exchange rates are likely to remain under pressure as domestic tensions continue to mount, with investors wary of further Brexit complications.
USD/GBP – US Dollar Could Surge after Fed Meeting
Markets fully expected the Federal Reserve to raise interest rates at its March policy meeting, helping to underpin a relatively bullish US Dollar. Following an unexpectedly strong non-farm payrolls report investors were encouraged to pile into the ‘Greenback’. However, with the rate hike effectively priced in the US Dollar struggled to find further upside momentum. If the Fed signals that it is likely to pursue a more aggressive pace of monetary tightening this could give USD exchange rates a boost. So long as domestic data continues to hold up the ‘Greenback’ is unlikely to suffer any particular pressure.
EUR/USD – More Hawkish ECB Comments Boosted Euro
Demand for the Euro jumped sharply in the wake of comments from European Central Bank (ECB) President Mario Draghi, who appeared to be more hawkish than markets anticipated. As speculation rose that the Bank could be shifting towards a more positive outlook on monetary policy, the single currency rallied strongly. Even so, with the Dutch heading to the polls and the threat of another populist upset looming over markets the Euro soon returned to a weaker footing. As the new Dutch government takes shape and the French presidential election runs on, political worries are likely to continue dominating the mood towards the common currency.