Pound Slides ahead of BoE, Fed to Support USD?

GBP/EUR Exchange Rate: Pound Slips Vs Euro on UK Economic Uncertainty

The Pound Euro exchange has trended lower over the last week against a backdrop of growing economic uncertainty in the UK.

Since last week’s UK government cabinet reshuffle and unexpectedly high inflation figures for August at 3.2%, the mounting energy crisis has highlighted challenges to the UK’s economic recovery as businesses continue to face supply chain issues and staff shortages.

Uncertainty has left the pound struggling for direction ahead of the Bank of England’s (BoE) latest interest rate decision where investors will look for signals that address concerns over UK economic growth.

While the BoE is expected to leave monetary policy unchanged, indications on the bank’s forward guidance could drive significant movement in the GBP/EUR exchange rate.

GBP/USD Exchange Rate: Pound US Dollar Slumps amid Mounting Energy Crisis

The Pound slumped against the US Dollar this week as the UK’s energy crisis cast doubt over the country’s economic outlook.

Record high gas prices heightened economic recovery concerns going into winter and CO2 shortages threaten to disrupt medical supplies, and the food and drink industry, prompting the UK government to intervene in production.

Worse-than-expected retail sales also weighed on GBP/USD at the end of last week after August’s data showed a -0.9% slump instead of 0.5% growth expected.

The Pound could recover some its losses on Thursday following September’s PMI data. The service sector is expected to remain unchanged in solid growth, as is manufacturing albeit at a slightly slower pace than in August.

USD/GBP Exchange Rate: US Dollar Strengthens ahead of Fed Decision

The US Dollar Pound exchange rate strengthened over the week as souring market sentiment boosted USD safe-haven demand, triggered by concerns Chinese property developer Evergrande could default on debts, which in turn would trigger an equity market selloff.

Stronger-than-expected US retail sales also boosted USD, showing 0.7% growth, up from -1.8% in July.

This evening’s Federal Reserve interest rate decision is the key focus for USD investors. Following increasing speculation the Fed will tighten monetary policy before the end of the year, confirmation the Fed will reduce its asset purchasing programme would likely support the US Dollar.

Durable Goods Orders data for August released at the start of next week may also support USD exchange rates as forecasts indicate a return to growth of 0.6%

EUR/USD Exchange Rate: Euro Struggles ahead of German Election

The Euro has trended lower against the US Dollar as USD strength pushed EUR down due to the negative correlation in the pairing.

Meanwhile, uncertainty ahead of this Sunday’s German election has weighed on EUR sentiment, with the ruling Social Democrat Party’s lead narrowing in polls.

The latest Eurozone consumer confidence data released this afternoon will like weigh on the Euro as sentiment is expected to have deteriorated further in September.

Looking ahead, September’s Eurozone PMIs may drive movement in the single currency. Growth is forecast to have slowed slightly this month but remain in growth territory.