- Pound rebounds on shock core inflation jump.
- Euro dented by softening inflation.
- US Dollar wavers on mixed Fed messaging.
- US Core PCE index in focus.
GBP/EUR Exchange Rate: Pound Wavers amid Mixed BoE Signals
Trade in the Pound Euro (GBP/EUR) exchange rate was choppy in the second half of last week. Mixed comments from Bank of England (BoE) Governor Andrew Bailey served to both aid and diminish Sterling’s appeal.
Governor Bailey stated that the second-round effects from rising wages were likely to keep inflation elevated. As such, the door was left open for additional tightening.
However, GBP was unable to gain much ground in the short term, as a lack of data releases weighed on Sterling. Furthermore, a wavering market mood kept the increasingly risk sensitive currency level.
This week, the Pound has remained rangebound against the Euro. The latest private sector indexes pointed to slowdown in the vital UK service sector, weighing on Sterling, a trend which may continue in the coming days.
GBP/USD Exchange Rate: Pound Rebounds amid Shock Core CPI Increase
The Pound US Dollar (GBP/USD) exchange rate traded in a wide range over the past week, as extended decline last week, then remained in place in the first half of this week’s session, with the pairing briefly striking a new one-month low in the process.
Sterling was able to rebound from its losses after Tuesday’s downbeat private sector indexes. These showed that activity in the UK’s manufacturing and service sectors were showing signs of slowdown. This sombre reading brought GBP/USD to a one-month low.
However, on Wednesday, the latest UK consumer price index showed a shock rise in core inflation. Economists had expected this to print at 6.2%, but instead it shot up to 6.8%. Sterling then firmed as bets for another BoE rate hike in June strengthened.
Later this week, the UK’s latest retail data is due to print. A recovery of 0.3% is forecast, which could bring cheer to GBP investors.
USD/GBP Exchange Rate: US Dollar Fluctuates amid Shifting Fed Rhetoric
The US Dollar Pound (USD/GBP) exchange rate wavered over the past week, as the Federal Reserve lacked unified messaging.
the ‘Greenback’ initially firmed as multiple Fed officials made their case for further tightening, bringing strength.
Yet, Fed Chair Jerome Powell took a more cautious stance, stating that interest rates may not need to climb further, leading USD exchange rates to falter at the end of last week.
This was then countered by a souring market mood on Monday and Tuesday, as anxieties over the US debt ceiling weighed on global trade.
Looking ahead, Friday’s core PCE price index data will be in the spotlight. With a hold at 4.6% forecast for the Fed’s preferred inflation gauge, rate hike bets could strengthen USD.
EUR/USD Exchange Rate: Euro Slumps as Hawkish ECB Fails to Overcome Soft Inflation
The Euro US Dollar (EUR/USD) exchange rate weakened over last week, as softening Eurozone inflation weighed on the single currency.
The bloc’s consumer price index showed a larger-than-expected cooldown in monthly inflation, which dented rate hike bets. This came in countenance to hawkish European Central Bank (ECB) rhetoric, which failed to inspire EUR investors.
However, a stronger-than-forecast service sector index provided some reprieve for the common currency. The PMI printed at 55.9 for May, exceeding expectations of a larger drop to 55.6.
Looking ahead, the German consumer confidence index may bring some support to the Euro. While it is forecast to remain in negative territory, an increase to -24 could bolster EUR.