Currencies Roundup: Pound Euro (GBP/EUR) Exchange Rate Weakens as UK House Price Growth Hits Five-Year Low

GBP/EUR – UK House Price Growth Slows to Five-Year Low

The latest Halifax house price index failed to offer the Pound any support, with price growth slowing to its lowest rate since March 2013 in the three months to October.

With the housing market continuing to slow this dented confidence in the outlook of the wider economy, keeping the Pound under pressure on Wednesday morning.

An acceleration in the third quarter UK gross domestic product could encourage GBP exchange rates to rally ahead of the weekend, however.

Evidence that the economy recovered some of its lost momentum in the third quarter, in spite of persistent Brexit-based anxiety, should give investors encouragement to favour the Pound.

Disappointing trade and production figures, though, may limit any GBP upside on Friday if the economy demonstrates further signs of softening.

GBP/USD – Pound Sees Volatility on Brexit Developments

Mixed messages over Brexit provoked additional volatility for the Pound over the course of the last week, with various officials continuing to sound both optimistic and cautious notes.

After Brexit secretary Dominic Raab commented ‘thumbs up’ on leaving a crunch cabinet meeting this encouraged the Pound to push sharply higher against its rivals.

However, as the meeting ultimately failed to yield any concrete progress towards a deal GBP exchange rates struggled to hold onto these initial gains for long.

With the issue of the Irish border still yet to be resolved a sense of uncertainty is likely to hang over the Pound for some time to come.

USD/GBP – Stronger Labour Market Fails to Boost USD

While October’s US non-farm payrolls report demonstrated a continued tightening of the labour market this was not enough to boost the US Dollar for long.

Political jitters weighed on USD exchange rates as anticipation mounted for the midterm elections and the prospect of a policy deadlock.

As the Democrats ultimately gained control of the House of Representatives this diminished the odds of further tax cuts and spending boosts, limiting the appeal of the US Dollar.

Even so, if the Federal Reserve maintains a hawkish outlook at its November policy meeting, paving the way for a December interest rate hike, the downside pressure on USD exchange rates is likely to ease.

EUR/USD – Underwhelming Eurozone PMIs Keep Euro Under Pressure

Signs continue to point towards weakness within the Eurozone economy as October’s raft of manufacturing and services PMIs demonstrated a fresh loss of momentum on the month.

As the Italian PMIs slipped into a state of contraction this raised fresh concerns over the government’s controversial 2019 budget, which officials remain under pressure to redraft.

Although the Eurozone producer price index picked up further in September this was not enough to encourage bets that the European Central Bank (ECB) will raise interest rates in the foreseeable future.

Support for the single currency could be in store if September’s German trade data proves positive, however, with investors expecting to see a widened trade surplus and higher export volumes.

Hannah Wilson

Contact Hannah Wilson