Pound Sterling Forecast: GBP/USD Exchange Rate Recovers on Sturdy Services Data, GBP/EUR Struggles

Pound Sterling Exchange Rates Recover as Service Sector Prints Sturdily

Pound Sterling (GBP) exchange rates recovered yesterday following sanguine UK service sector data.

The key tertiary industries PMI, which accounts for over 70% of British economic output, printed at 54.2 in December, up from 53.8 in November and beating forecasts of 54.0.

Analysts estimate that the sturdy print equates to quarterly GDP growth of 0.4%-0.5% in the final three months of 2017.

The Pound traded higher versus some of the majors as traders breathed a sigh of relief after both manufacturing and construction had disappointed expectations.

Business activity was seen to have picked up last month, however, new work and employment did decelerate slightly.

Pound to Euro Exchange Rate Dips Following Multiyear High Eurozone Private Sector Data

Although the Pound recovered against several of its peers on Thursday, the GBP/EUR exchange rate declined.

While the UK service sector performed sanguinely in 2017, analysts believe that Brexit uncertainty put the brakes on what could have been a much better year for the British economy.

With that in mind it is no surprise to see that Sterling failed to grow against the Euro during yesterday’s session, when it was announced that private sector output in the Eurozone hit a near-seven year high of 58.1 in December.

The robust survey data brought the 2017 composite PMI average up to 56.4, which is the highest annual trend since 2006.

The Pound depreciated by around -30 pips versus the single currency yesterday, and we could see Sterling struggle against the Euro over the near-term if robust Eurozone economic data translates into rising inflationary pressures.

However, this morning’s Eurozone CPI report is expected to see consumer prices cool from 1.5% to 1.4%.

Pound to US Dollar Exchange Rate Rallies Ahead of US Non-Farm Payrolls Print

Upbeat UK service sector data helped Sterling rally by around 40 pips versus the US Dollar (GBP/USD) yesterday.

Later this afternoon the December US non-farm payrolls report is tipped to show that job creation moderated from 228,000 to 188,000 last month.

With unemployment expected to remain at 4.1% – its lowest level for around 17 years – the ‘Greenback’ should avoid any steep losses unless the NFP print comes in closer to the 100,000 mark.

Pound to Canadian Dollar Exchange Rate Could Rally on Soft Canadian Jobs Report

Buoyant crude oil prices kept the commodity-correlated Canadian Dollar (CAD) afloat yesterday, however, we could see the currency soften slightly during today’s session if Canadian jobs growth grinds to a halt, as economists forecast.

The median market consensus is for a slight rise in joblessness, from 5.9% to 6.0%, with job creation tipped to plummet from 79,500 in November to zero in December.

If the jobs figures match the forecasts then softening Bank of Canada rate hike bets could damage the appeal of Canadian Dollar exchange rates.

Pound to Australian Dollar Exchange Rate Depreciates -50 Pips as Markets Price 70% Chance of 2018 RBA Rate Hike

The Pound to Australian Dollar (GBP/AUD) exchange rate slid by around half a cent yesterday as investors raised their Reserve Bank of Australia rate hike projections to suggest a 70% chance of a piece of RBA tightening in 2018.

Demand for the commodity-sensitive ‘Aussie’ appeared to spike following news that China’s service sector PMI hit a three-year high of 53.9 in December, up from 51.9 in November.

The upbeat print was seen to bode well for future trade between the two nations and this bolstered the appeal of the Antipodean currency.

Pound to New Zealand Dollar Exchange Rate Slides to 6-Week Low

The Pound also lost out to the commodity-linked New Zealand Dollar (GBP/NZD) following the sturdy Chinese PMI report.

The GBP/NZD exchange rate plunged -150 pips to hit a six-week low as sentiment in the Asia-Pacific region improved.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard