Today’s Pound Sterling Headlines
Pound Sterling rises vs most majors – Bank of England’s Tenreyro says interest rate path depends on Brexit.
GBP/EUR exchange rate down -30 pips – Hope of German coalition.
GBP/USD exchange rate rises to seven-week high – Profit-taking could take ‘Cable’ lower.
Pound ticks higher on Brexit speculation – GBP higher against Canadian Dollar, Australian Dollar and New Zealand Dollar today.
Brexit and BoE Rate Hike Forecasts Send Pound Sterling Exchange Rates Higher
The Pound Sterling to Euro (GBP/EUR) exchange rate lost out on Friday but the British currency gained versus most of its other most-traded currency peers on Friday.
Bank of England policymaker Silvana Tenreyro suggested that market expectations of two further rate hikes over the next three years seemed reasonable, but added that future interest rate decisions will likely be dictated by Brexit:
‘People, up until recently, thought that Brexit meant monetary policy would remain highly accommodative and interest rates would stay low forever. But Brexit might present other challenges that require the opposite. It might require an adjustment either way.’
While the statement failed to knock Sterling, the point that interest rates could yet fall again if Brexit has unforeseen negative consequences for the UK economy will have registered with investors.
Pound to Euro (GBP/EUR) Exchange Rate Slips as German Coalition Hopes Boosted
The Pound to Euro (GBP/EUR) exchange rate slid by around -30 pips on Friday as demand for the single currency improved on hopes of a new German coalition arrangement.
The single currency responded positively to news that Germany’s Social Democrats, which had previously vowed to go into opposition following its worst poll result for 70 years, had agreed to enter coalition talks with Chancellor Angela Merkel’s Christian Democratic Union.
Although SPD leader Martin Schulz pledged that party members would have the final say on any deal, European sentiment improved following the development as it was seen to reduce the chances of another general election and prolonged political uncertainty.
Pound to US Dollar (GBP/USD) Exchange Rate Hits Highest Level Since Beginning of October
Sterling struck a seven-week high against the US Dollar on Friday after appreciating by around a third of a cent.
Demand for the ‘Greenback’ softened following a couple of downbeat US private sector PMI prints.
Manufacturing activity came in at 53.8, disappointing estimates of 55.0, while service sector growth was reported at 54.7, compared to calls for 55.3.
However, with the Pound trading at its highest level against the US Dollar since the start of October, it is entirely likely that we could see a pullback in GBP/USD at the start of this week’s session.
Pound to Canadian Dollar Exchange Drifts Higher on Brexit Speculation
Despite a mild rise in oil prices on Friday, the Canadian Dollar softened slightly versus the Pound.
Although EU officials noted that no progress was made on Brexit during UK Prime Minister Theresa May’s Friday meeting with European Council President Donald Tusk, the Pound remained well-bid due to speculation that the PM is prepared to offer a higher Brexit divorce bill.
Tusk has said that Britain needs to present something new by December 4 if the negotiations are to move from divorce to future trade.
So, if May’s purported higher offer is accepted we could see Sterling rise over the next fortnight. On the other hand, if EU leaders are not impressed with Britain’s offer then the Pound could endure steep losses.
Pound to Australian Dollar Exchange Rate Could Rally on Brexit Progress
The Pound to Australian Dollar (GBP/AUD) exchange rate rose by around 60 pips on Friday but future strength will likely depend on the UK government’s ability to appease the EU’s Brexit divorce terms.
If both parties reach an accord and begin discussing future trade it will take Britain a step closer to agreeing a transitional deal, which would give businesses a certain level of stability and hopefully trigger a wave of investment decisions.
Pound to New Zealand Dollar Exchange Rate Rallies 70 Pips
The Pound to New Zealand Dollar (GBP/NZD) exchange rate jumped 70 pips on Friday as Sterling enjoyed mild rallies across the board.
Data Affecting Today’s Pound Sterling Forecast
No significant data due for release today.