Pound Exchange Rates Roundup: GBP Tumbles as UK Inflation Weakens

GBP/EUR Exchange Rate: Pound Fails to Capitalise on Falling Unemployment

The UK unemployment rate unexpectedly falling to a forty-two-year low of 4.2% in February has not been enough to boost the appeal of the Pound.

Markets were more concerned by the fact that average weekly earnings had failed to pick up as forecast, clocking in at 2.8% rather than 3.0%.

Although this still saw real wage growth return, albeit at just 0.1%, GBP exchange rates quickly retreated from their recent multi-month highs.

The Pound could still find a fresh rallying point if Thursday’s retail sales data points towards a higher level of consumer spending.

With resilient levels of consumer spending having helped to buoy economic activity since the Brexit vote a stronger showing here is likely to benefit Sterling.

GBP/USD Exchange Rate: Weaker-than-Forecast UK Inflation Prompts Fresh Pound Slump

Confidence in the Pound declined further in response to March’s consumer price index data, which fell short of forecasts to clock in at 2.5% rather than 2.7% on the year.

GBP exchange rates slumped sharply on the back of this disappointing dip in inflationary pressure, with the odds of a May interest rate hike from the Bank of England (BoE) diminishing.

With inflation continuing to drop back towards the BoE’s 2% target the case for further monetary tightening looks less convincing, removing some of the Pound’s recent support.

If policymakers take a less hawkish tone in future comments, and domestic data continues to fall short of forecast, GBP exchange rates are likely to retreat further.

USD/GBP Exchange Rate: Geopolitical Worries Continue to Dampen US Dollar Demand

In the wake of the US-led missile strike on Syria over the weekend global geopolitical tensions have since eased a little, reducing market support for the safe-haven US Dollar.

Confidence in USD exchange rates was also shaken by the comments by Donald Trump, with his accusations that Russia and China are deliberately devaluing their currencies.

Even so, better-than-expected industrial production and capacity utilisation figures offered the US Dollar some support on Tuesday afternoon.

Speculation over the likely pace of future Federal Reserve policy tightening could provoke further jitters for USD exchange rates in the near term, particularly if the latest leading index reading disappoints.

EUR/USD Exchange Rate: Weakening German Confidence Weighs on Domestic Outlook

Investors were not impressed to find that the German ZEW economic sentiment survey had slumped sharply from 5.1 to -8.2.

This represents a significant deterioration in confidence within the Eurozone’s powerhouse economy, exacerbating fears that the currency union is continuing to lose economic momentum in 2018.

A downward revision to the finalised Eurozone consumer price index for March put additional pressure on the Euro, giving the European Central Bank (ECB) more incentive to leave monetary policy on hold.

The mood towards the single currency could improve next week, however, if April’s raft of Eurozone manufacturing and services PMIs point towards a fresh uptick in economic activity.

Hannah Wilson

Contact Hannah Wilson