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Pound bolstered by uptick in wage growth
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US Dollar tumbles as latest inflation figures miss
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Euro bolstered by signals of further ECB interest rate hikes
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Fed, BoE and ECB all set to deliver interest rate decisions
GBP/EUR Exchange Rate: Pound’s Gains Limited by Widespread Strike Action
The Pound Euro (GBP/EUR) exchange rate climbed over the past seven days. The Pound (GBP) initially saw a boost following the announcement of a new UK-US gas deal.
The currency’s gains were capped as the week went on, however. The prospect of widespread industrial action weighed on the Pound as talks with the various unions failed to produce meaningful results.
The poor long-term outlook for the UK economy also kept pressure on Sterling.
Going forward GBP investors will be keeping a close eye on the UK’s upcoming retail sales and PMI release. Any above forecast data could help to alleviate concerns over the UK economy and boost the Pound.
GBP/USD Exchange Rate: Sterling Boosted by Above-Forecast Wage Growth
The Pound US Dollar (GBP/USD) exchange rate hit its highest point since August over the past week. The Pound managed to climb despite a lack of data as investors continued to price in a 50bps interest rate hike from the Bank of England (BoE).
Upbeat GDP data provided Sterling with a strong upward momentum on Monday. The UK’s economy expanded above forecasts in October after additional bank holidays prompted a contraction in September.
Mixed jobs data on Tuesday also saw the Pound gain. Above-forecast wage growth prompted additional bets on BoE rate hikes which pushed GBP higher. On the other hand, a rise in unemployment and a drop in vacancies pointed to a cooling labour market and capped Sterling’s gains.
Looking ahead, the BoE’s is widely expected to deliver a 50bps rate hike when it concludes its final policy meeting of the year.
With the hike largely priced in, the focus will be on the BoE’s forward guidance. A cautious stance from the central bank could weigh on GBP exchange rates.
USD/GBP Exchange Rate: Cooler Inflation Figures Sees USD Plummet
The US Dollar Pound (USD/GBP) exchange rate tumbled over the past seven days. The US Dollar (USD) was placed on the backfoot in the second half of last week amid a healthy risk appetite. An uptick in jobless claims also weighed on USD.
These losses were tempered by some upbeat data on Friday, with the latest US PPI and Consumer sentiment figures beating forecasts.
However, the US Dollar then faced a sharp selloff earlier this week with the publication of the US consumer price index on Tuesday.
A below forecast inflation reading further undermined expectations for future interest rate hikes from the Federal Reserve.
The Fed’s interest rate decision on Wednesday could drive USD lower if they confirm a rate hike slowdown. A forecast slump in retail sales on Friday could also push the US Dollar lower.
EUR/USD Exchange Rate: Bets on ECB Rate Hikes Lend Support to Euro
The Euro US Dollar (EUR/USD) exchange rate rose over the past seven days. The single currency enjoyed gains on Wednesday after above-forecast Eurozone GDP and German industrial production data.
An improving market mood kept gains for the Euro limited as the week went on. The prospect of renewed Chinese demand prompted risk-on flows. Further escalation in the Russia-Ukraine conflict also kept pressure on EUR.
On the other hand, persistent bets on further interest rate hikes from the European Central Bank (ECB) underpinned EUR. Speeches from multiple policymakers signalled a hawkish turn from the central bank. A strong recovery in Germany’s economic sentiment also bolstered the currency on Tuesday.
The ECB’s interest rate decision on Thursday will be the central focus for EUR investors. Signals of further interest rate hikes from the central bank despite recession risks could push the single currency higher. Upbeat PMI figures from the Eurozone could also bolster the EUR exchange rates on Friday.