GBP/EUR exchange rate: Pound volatile amid mixed BoE comments
The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week, amid mixed communication from the Bank of England (BoE).
On Monday, while the final service PMI for January printed above expectations, it signalled cooling inflationary pressures. This sent the Pound spiralling, as investors moved to bet on interest rate cuts from the BoE.
However, dip-buying then allowed GBP to recover on Tuesday. On Wednesday hawkish remarks from BoE Deputy Governor Sarah Breeden strengthened GBP as she maintained the BoE’s work remained unfinished.
Inconsistent remarks from other BoE policymakers, however, saw Sterling waver through to the end of the week.
Tomorrow, the latest UK labour data is set for release. Unemployment is forecast to have ticked higher in December, with the rate hitting 4%, while average earnings are anticipated to have cooled. This may induce volatility in GBP, as investors may bet on dovish action from the BoE.
GBP/USD exchange rate seesaws amid shifting BoE rate cut bets
Trade in the Pound US Dollar (GBP/USD) exchange rate was similarly varied over last week’s session. While a lack of data capped the Pound’s gains on Tuesday, bullish trade contributed tailwinds.
On Wednesday, BoE Governor Breeden stressed that inflation remained too high. This sparked bets amongst investors that the bank would keep interest rates elevated for longer, strengthening GBP.
Later in the week, the Pound came under pressure following mixed remarks from BoE policymaker Jonathan Haskel. While he voted for a rate hike at the last meeting, he suggested the decision was ‘finely balanced’ and indicated he was open to changing his position, dampening the Pound.
Looking ahead to Wednesday, the latest UK inflation data is due for publication. Both the core and headline rates are forecast to have ticked higher, which may strengthen the Pound by denting rate cut bets.
Later in the week, the UK’s latest GDP growth data may weigh heavily on Sterling. Economists are forecasting that the data will reveal the British economy slipped into a recession at the end of last year.
USD/GBP exchange rate: US Dollar turbulent amid shifting market mood
The US Dollar Pound (USD/GBP) exchange rate traded in a wide range last week, amid wavering levels of risk appetite.
Monday saw the US Dollar begin the week in strong form, following hawkish remarks from Federal Reserve Chair Jerome Powell. Furthermore, a forecast-beating ISM services PMI provided additional tailwinds.
However, an improving market mood stifled the safe-haven ‘Greenback’ during Tuesday’s trade, as investors favoured riskier assets.
The ‘Greenback’ remained sidelined in midweek trade, amid a lull in macroeconomic data releases. Trading conditions then began to sour on Thursday, lifting the US Dollar against unsteady peers.
At the end of the week’s trade, a downward revision to US inflation figures pressured USD. The headline rate was cooler than initially thought in December, sparking further interest rate cut bets.
Tomorrow, the latest US inflation data is due to print. In January, headline and core inflation are both expected to have cooled, which may weaken the US Dollar.
EUR/USD exchange rate: Euro undermined by poor German data
The Euro US Dollar (EUR/USD) exchange rate fluctuated last week. The Euro weakened on Monday amid downbeat German trade data and a cooldown in Eurozone PPI.
Although German factory orders data for December soared above expectations, a large contraction in Eurozone retail sales dented EUR.
German industrial production contracted more than expected in December, which served to weaken the Euro in midweek trade. Data releases were in short supply on Thursday, leading to muted trade for the Euro.
On Friday, EUR exchange rates remained subdued following news that German inflation cooled in line with expectations. This furthered speculation that the European Central Bank (ECB) will begin to cut interest rates soon.
Tomorrow, the latest German ZEW economic sentiment index is set to release, reflecting February’s outlook. Sentiment is expected to have improved this month, which may lift the Euro.