GBP Forecast: Pound Sterling Close to 3-Month High against US Dollar, 3-Week High vs Euro

Pound Sterling Exchange Rates Drift Higher as PM May Reshuffles Cabinet

With little on the economic calendar during the first half of this week’s session, Pound Sterling (GBP) traders focused on UK Prime Minister Theresa May’s cabinet reshuffle yesterday.

However, the news that Brandon Lewis was to replace Patrick McLoughlin as the Conservative Party chairman did little to buffet the Pound Sterling exchange rate, as it was not seen to impact growth prospects or interest rate expectations.

May opted to retain the services of her most prominent cabinet members, with Amber Rudd remaining home secretary, Philip Hammond remaining Chancellor, Boris Johnson remaining foreign secretary and David Davis remaining Brexit secretary.

Sterling drifted higher following the announcements, as a major reshuffle could have been seen to highlight the fragility of May’s government.

Pound to Euro (GBP/EUR) Exchange Rate Hits 3-Week High Ahead of Eurozone Unemployment Report

The Pound to Euro (GBP/EUR) exchange rate hit its highest level for around three weeks yesterday as traders breathed a sigh of relief that UK PM Theresa May’s cabinet reshuffle didn’t lead to any high profile changes.

The single currency, meanwhile, struggled across the board as markets continued to push back European Central Bank interest rate expectations in light of Friday’s soft CPI report.

With Eurozone inflation running at 1.4%, significantly lower than the ECB’s target, there is little optimism among traders that the central bank will raise rates anytime soon and this is weighing on demand for the Euro.

Later this morning Eurozone unemployment is tipped to drop to a near-nine-year low of 8.7%, which could give the single currency some respite. However, the region’s soft inflationary outlook is liable to limit any large Euro rallies.

Pound to US Dollar (GBP/USD) Exchange Rate Near 3-Month High

The Pound to US Dollar (GBP/USD) exchange rate remains just under three-month highs.

Sterling has made a positive start to the New Year, but with little on the agenda over the next few weeks, most analysts are predicting a period of relative stability.

It will either take a massive upside surprise in economic data – one large enough to persuade the Bank of England to move ahead plans to raise interest rates – or a significant Brexit shock to knock GBP/USD out of the five-cent range that the currency pair has remained in for the majority of the past six months.

Pound to Canadian Dollar (GBP/CAD) Exchange Rate Rebounds from 2-Month Low

The Pound to Canadian Dollar (GBP/CAD) exchange rate increased in value by around a third of a cent yesterday as investors locked in profit from the near-two-month low that GBP/CAD struck following Friday’s sanguine Canadian labour market report.

Demand for the high-beta ‘Loonie’ skyrocketed when it was announced that the headline jobless rate unexpectedly plunged from 5.9% to 5.7% in December, courtesy of a sizable 78,600 jump in job creation.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Flat but Analysts Eye ‘Aussie’ Gains in 2018

Sterling fluctuated with little conviction versus the Australian Dollar (GBP/AUD) throughout most of yesterday’s session.

However, analysts at HSBC believe 2018 could be a strong year for the ‘Aussie’ if the Reserve Bank of Australia begins a hiking cycle in the first half of the year.

The strategists note that sturdy domestic growth combined with a robust labour market could prompt the RBA to begin tightening policy in the second quarter.

Pound to New Zealand Dollar Exchange Rate Touches 2-Month Low

The Pound to New Zealand Dollar (GBP/NZD) exchange rate briefly touched a two-month low yesterday, however, profit-takers took Sterling higher by the end of the session.

It will be interesting to see whether yesterday’s low will hold, or whether markets will drive GBP/NZD down again over the coming trading sessions.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon