Today's Pound Sterling Forecast vs the US Dollar and Euro
While many industry experts had predicted that a slide in the level of UK inflation would undermine demand for Sterling and see the Pound to Euro and Pound to Dollar exchange rates decline, the result actually gave the British currency a boost.
A quick foreign exchange market summary before we bring you the rest of the report:
On Friday the Euro to British Pound exchange rate (EUR/GBP) converts at 0.858
The live inter-bank GBP-EUR spot rate is quoted as 1.166 today.
The GBP to USD exchange rate converts at 1.251 today.
FX markets see the pound vs australian dollar exchange rate converting at 1.912.
NB: the forex rates mentioned above, revised as of 26th Apr 2024, are inter-bank prices that will require a margin from your bank. Foreign exchange brokers can save up to 5% on international payments in comparison to the banks.
GBP Advances vs EUR, USD, AUD and NZD
The Pound advanced on almost all of its most traded currency counterparts over the course of the European session.
While UK inflation had been expected to slide from 1.3% to 1.2% in November, it actually fell to 1.0% - half the Bank of England’s target of 2% and in line with expectations that CPI will move below 1.0% over the next six months.
The rate of inflation is now at its lowest for over a decade. The result saw economist David Tinsley comment; ‘Weak inflation is boosting their spending power at a critical time of year we can expect some robust retail sales out-turns in coming releases.’
Pound to Euro Exchange Rate Recoups Losses
The Pound initially dipped after the report was published, but swiftly recouped all of its losses.
Gains in the GBP/EUR pairing were a little limited as the Euro was supported by generally positive Manufacturing/Services Purchasing Managers Indexes for the Eurozone and its largest economies and an unexpectedly buoyant ZEW Economic Sentiment gauge for Germany.
The PMI data for the currency bloc was accompanied by this comment from Markit economist Chris Williamson; ‘The Eurozone saw slightly faster growth of business activity in December but still ended the year on a whimper rather than a roar, with worrying weakness still evident in the core countries of France and Germany. The increase was the second–lowest seen over the past year, suggesting the Euro area economy expanded by a mere 0.1% in the fourth quarter.’
The ZEW economic sentiment survey for Germany jumped from 11.5 in November to 34.9 in December. A much more moderate reading of 20.0 had been predicted. Similarly, the Eurozone’s ZEW Economic sentiment gauge rallied from 11 to 31.8. The result prompted this response from ZEW President Professor Clemens Fuest; ‘Confidence in the German economy seems to be slowly returning among the financial market experts surveyed by ZEW. This increase is related to favourable economic conditions such as the Weak Euro and the low crude oil price. The recently published German export figures already show a positive trend. However, we should be aware that the current optimism is fuelled by factors that might change even over the short term.’
Pound to Dollar Exchange Rate Today
During the North American session the GBP/USD exchange rate posted additional gains thanks to unexpectedly weak US housing starts/building permits figures.
The Markit US manufacturing PMI also came in below forecast levels. Tomorrow movement in the GBP/EUR exchange rate could be driven by the UK’s employment figures for October and the publication of the Bank of England’s latest policy meeting minutes. Demand for the Euro will also be affected by the Eurozone’s Consumer Price index for November.
Meanwhile, GBP/USD volatility could be driven by US CPI and the Federal Open Market Committee’s interest rate decision.
Update 18/12/2014:
GBP/USD: The Pound to Dollar rate strengthened from a 15-month low on Thursday as UK retail sales surged to a ten year high.
GBP/EUR: The Pound to Euro rate advanced by around 0.66% on Thursday morning thanks to the aforementioned British retail sales figures.