Pound Sterling Exchange Rates Rocket despite Gloomy Office for Budget Responsibility Forecasts in Spring Statement

Gloomy UK Economic Forecast Fails to Stop Pound Sterling (GBP) Exchange Rates Climbing

Chancellor of the Exchequer Philip Hammond delivered the Spring Budget Statement yesterday, with the Office for Budget Responsibility (OBR) publishing its latest forecasts.

Although the economic outlook didn’t make for particularly inspiring reading, the Pound shot higher versus a number of its major currency peers.

The OBR forecast that the UK economy will grow at a rate below 1.5% over the coming five years; something not seen since 1875-1879.

GBP/EUR Left Stuck around Opening Levels after US Inflation Data

The GBP/EUR exchange rate ended the day stuck around opening levels, with the Euro at first weakened, then strengthened, in the run-up to and fall out from the US consumer price index data respectively.

There was no Eurozone data on the calendar, but new forecasts from the Organisation for Economic Co-operation and Development (OECD) which raised the outlook for the German and French economies this year provided some support.

A speech from European Central Bank (ECB) President Mario Draghi is due imminently.

Run-of-the-Mill US Inflation Data Sends GBP/USD Exchange Rate Soaring

Pound Sterling was left on bullish form after the latest US consumer price index figures, despite the data printing solidly overall.

However, solid data isn’t enough for the US anymore. Rather like in the Eurozone, economic growth on its own isn’t good enough; markets want to see that this strength is translating into higher wages and stronger inflation – something that was not evident from yesterday’s figures.

US advance retail sales data is set for release today and, although some growth is predicted, it seems unlikely USD will get a boost from it if yesterday’s inflation data wasn’t sufficient to lift US Dollar demand.

GBP/CAD Races 1.1% Higher as BOC Poloz Claims Economy can Grow without Boosting Inflation

The Canadian Dollar slumped yesterday, pushing the GBP/CAD exchange rate higher, after a speech from Bank of Canada (BOC) Governor Stephen Poloz.

He used the speech to say that the Canadian economy still contained a degree of slack and therefore may be able to generate further growth without pushing inflation higher. This suggests that a strong economy won’t necessarily force interest rates up.

GBP/AUD Exchange Rate Strong despite Boost for Australian Dollar from US Data

While the disappointingly mediocre US data yesterday boosted the Australian Dollar versus many of its peers, the GBP/AUD exchange rate was still able to make strong gains.

The mixed nature of recent Australian data, which showed a slump in consumer and business confidence but a record high for the assessment of business conditions, weighed on the ‘Aussie’.

US Data Disappointment and Canadian Dollar Weakness Keep GBP/NZD below Opening Levels

Appetite for the New Zealand Dollar heated up yesterday after the release of the latest US inflation data. With the Canadian Dollar slumping, NZD also found itself with less competition as a high-risk asset.

The GBP/NZD exchange rate therefore ended the day stuck below opening levels.

Predictions of a solid uptick in growth from tonight’s fourth-quarter New Zealand GDP figures could keep NZD on buoyant form for the rest of the day.

Laura Parsons

Laura has been working in the financial services sector since 2012 and provides currency news updates for a number of online and print publications. Over the years she has produced exchange rate analysis for publishers like French Property News, The Express, The Telegraph and Forbes.

Contact Laura Parsons