Pound Gains Ground as UK Reports Boost BoE Bets, US Dollar Fluctuates following Inflation Data

GBP/EUR Exchange Rate Hits Two-Week High on BoE Bets

The Pound Euro (GBP/EUR) exchange rate stumbled in the middle of last week’s session following a bleak forecast from the National Institute of Economic and Social Research (NIESR). The thinktank warned that the UK faces five years of ‘lost growth’ and outlined recession risks.

However, stronger-than-forecast UK GDP figures helped the Pound (GBP) rally, with both June’s monthly reading and the second-quarter results exceeding expectations.

Following data releases further boosted GBP/EUR, seeing it hit a two-week high. Record wage growth and sticky core inflation both reinforced expectations that the Bank of England (BoE) may choose to hike interest rates even higher.

Looking forward, Friday’s retail sales figures could trim Sterling’s gains. Forecasters expect UK sales to have contracted by 0.5% in July.

GBP/USD Exchange Rate Fluctuates as Risk Aversion Limits Sterling

The Pound US Dollar (GBP/USD) exchange rate fluctuated over the past seven days as a gloomy market mood prevented the riskier Pound from sustaining its gains against the safer US Dollar (USD).

Concerns about China’s stuttering recovery kept risk appetite in check, amid signs of deflation in the world’s second-largest economy and Beijing’s decision to stop publishing youth unemployment data after it hit a record high in June.

Strong UK data and BoE bets kept Sterling afloat, however, preventing steeper losses. GBP was also able to rise higher after the UK’s consumer price index exceeded forecasts, with stubbornly high core inflation boosting BoE bets.

In the middle of next week, the UK’s latest PMI results are due out. Could signs of a resilient UK economy help lift the Pound against the US Dollar?

USD/GBP Exchange Rate Fluctuates as Investors Respond to US Inflation

The US Dollar Pound (USD/GBP) exchange rate experienced volatility over the past week as investors reacted to some high-impact American economic data.

The first major release was the latest US CPI. While the figures printed below forecasts, headline inflation accelerated for the first time in a year. A subsequent rise in US Treasury bond yields lifted USD.

An uptick in producer price inflation saw some choppy trade at the end of last week, while a risk-off market mood helped the ‘Greenback’ hold its gains. However, stronger US retail sales cheered investors this week, removing a key pillar of support for the US Dollar.

Coming up, the meeting minutes from the Federal Reserve’s latest policy decision will be published this evening. If Fed policymakers signal support for a September rate hike, USD/GBP could rally.

EUR/USD Exchange Rate Weakens amid Lack of Data

The Euro US Dollar (EUR/USD) exchange rate wavered through the latter part of last week’s session, as a lack of Eurozone economic data left EUR/USD to be driven by movement in the ‘Greenback’.

This lack of data saw the single currency slide as this week’s trade began, with the safe-haven ‘Greenback’ buoyed by risk aversion. The Euro (EUR) briefly touched a one-month low against the US Dollar.

EUR then found some success after a surprise improvement in German economic sentiment. However, the gains were short-lived, and the common currency slipped back against the stronger USD.

Eurozone data remains in fairly short supply over the coming week, until the latest PMI surveys come out on Wednesday. If the data shows further signs that the bloc’s private sector is struggling, EUR/USD could drop.

Samuel Birnie

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