Pound Slips amid Dovish BoE Comments, US Dollar Lifted by Fed Hike Bets

GBP/EUR Exchange Rate: Pound Weakens amid Declining BoE Hike Bets

The Pound Euro (GBP/EUR) exchange rate weakened over the past week, as Bank of England (BoE) interest rate hike bets diminished.

This was primarily linked to dovish remarks from BoE Governor Andrew Bailey. Sterling plummeted as he testified before Parliament’s Treasury committee, and suggested that the bank was nearer to the ‘top of the cycle’.

Additionally, a lack of data prevented Sterling from finding its footing through to the end of the week. This further undermined BoE rate hike bets.

With data releases in short supply through to the end of the week, Sterling may be left vulnerable to UK economic concerns. Recent news has painted a bleak picture, and further downbeat readings may weigh on GBP.

GBP/USD Exchange Rate: Pound Stumbles amid Dismal UK Economic Data

The Pound US Dollar (GBP/USD) exchange rate seesawed over the past week, as downbeat economic data outweighed risk-on trade.

Yesterday, Sterling was able to gain ground against the US Dollar (USD) due to its increasingly risk-sensitive nature. The cheery trade brought support to the Pound.

However, GBP was unable to sustain its upward momentum following a disappointing set of jobs data. While wage growth remained at record levels, unemployment rose to a near two-year high, denting Sterling. Furthermore, a sharp 0.5% contraction in UK GDP brought further pressure to Sterling.

Next week, the latest UK inflation data is scheduled for print. Core inflation has proven sticky, and if it follows along with previous releases it could boost BoE rate hike bets. However, if it does cool notably, diminished hike bets could weaken GBP rates.

USD/GBP Exchange Rate: US Dollar Rises amid Renewed Fed Hike Bets

The US Dollar Pound (USD/GBP) exchange rate climbed through the second half of last week, amid renewed Federal Reserve rate hike bets.

The US Dollar’s initial gains were supported by surprising economic resilience. The ISM services index unexpectedly accelerated, raising expectations of further Federal Reserve rate hikes.

This was further compounded by a drop in US jobless claims, which suggested a tight labour market. With this in mind, the Fed appeared closer to delivering a ‘soft landing’, but that there was still room left for a further hike.

However, wavering risk appetite over the last few days trimmed some of the US Dollar’s gains.

Later today, August’s inflation data is scheduled for publication. Core inflation is forecast to cool notably, which could dent the ‘Greenback’ if it triggers a paring of Fed hike bets.

EUR/USD Exchange Rate: Euro Capped by Downbeat Economic Releases

The Euro US Dollar (EUR/USD) exchange rate fluctuated over the past week, as bleak Eurozone economic data battered the Euro (EUR).

A shock 11.7% slump in German factory orders dented the Euro on Wednesday. The Eurozone’s largest economy has seen consistently poor data in recent months, sapping sentiment toward EUR.

GDP growth for the bloc was revised lower, sparking speculation that the European Central Bank (ECB) may stop hiking rates.

This weighed on the Euro throughout the week, preventing the common currency from gaining ground against its peers.

Next week, the European Central Bank are set to deliver their latest interest rate decision. A pause is expected following weeks of downbeat economic data and signs of cooling inflation, which may weaken EUR.

John Mulcahey

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