Even with some of its exchange rate bullishness fading the Pound Sterling (GBP) has continued to trend towards best levels against the Euro (EUR) and US Dollar (USD), benefiting from ongoing Fed rate hike speculation
The British Pound Euro exchange rate saw a minor recovery, unlike against the US dollar, above opening levels on Friday.
The outlook for the EUR could be improving thanks to strong lending figures.
Despite the UK’s referendum, lending to businesses in the Eurozone increased by 1.9% during July, accelerating on the previous month and potentially lowering the need for the European Central Bank (ECB) to act further to stimulate the economy.
Demand for the US Dollar failed to pick up in response to fresh hawkish commentary from Kansas City Fed President Esther George, who has repeatedly voted to hike interest rates over the last year.
Ahead of the afternoon’s central banker commentary markets have remained in something of a muted state, leaving the GBP exchange rate complex trending in a narrower range.
Despite a bullish run in recent days the Pound Sterling (GBP) has struggled to maintain its momentum, with investors still wary of the detrimental impact that the Brexit vote has had on the UK economy.
Recent UK data has proven largely positive over the week, with the CBI reporting strong improvements in retail sale and exports in August, although these strong performances were thought to be attributable to the relative weakness of the Pound.
As a result the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates have continued to trend higher, benefitting from a general decline in safe-haven demand.
Latest Pound/Euro Exchange Rates
On Saturday the Euro to British Pound exchange rate (EUR/GBP) converts at 0.862
FX markets see the pound vs euro exchange rate converting at 1.16.
At time of writing the pound to us dollar exchange rate is quoted at 1.237.
FX markets see the pound vs australian dollar exchange rate converting at 1.928.
Today finds the pound to indian rupee spot exchange rate priced at 103.121.
The live inter-bank GBP-NZD spot rate is quoted as 2.101 today.
Please note: the FX rates above, updated 20th Apr 2024, will have a commission applied by your typical high street bank. Currency brokers specialise in these type of foreign currency transactions and can save you up to 5% on international payments compared to the banks.
GBP/USD Exchange Rate Outlook: Ahead of the weekend, investor focus has turned generally to the Jackson Hole Symposium, and a speech from Fed Chair Janet Yellen in particular.
Markets are hopeful that Yellen will offer some indication as to when to expect the next interest rate hike from the Federal Reserve, with speculation having been divided by the mixed nature of recent US data.
Quite what tone Yellen takes on monetary policy, if she chooses to comment at all, will determine the ultimate reaction of the softened US Dollar (USD), as Lee Hardman, Currency Analyst at MUFG, noted:
‘The initial market reaction would likely be one of relief if there is no explicit signal over a September hike although it won’t be ruled out either which should help limit US dollar weakness. It would likely take Chair Yellen to discuss in more detail about potentially raising the inflation target in the future to generate a larger US dollar decline. In contrast if Fed Chair Yellen acts to guide the market towards a September rate hike, the US dollar could strengthen materially.’
Euro (EUR) Exchange Rates Expected to Remain Under Pressure after Dip in Eurozone M3 Money Supply
The Euro (EUR) has struggled to particularly benefit from the recent weakness of the US Dollar, as the outlook of the Eurozone economy has also remained less than robust.
German business sentiment was found to have unexpectedly weakened in August, with investors further discouraged by the news that the Eurozone M3 money supply had seen a sharp dip in July.
Altogether this did not give markets particular reason to favour the single currency, as weaker inflationary pressure would seem to suggest that the European Central Bank (ECB) could be encouraged to loosen monetary policy further in response.
Dovish BoE Commentary Forecast to Weigh on GBP Exchange Rates
Commentary from Bank of England (BoE) Deputy Governor Minouche Shafik could provoke additional volatility for the GBP exchange rate complex on Friday afternoon.
If Shafik indicated that the BoE is likely to cut interest rates again imminently this is likely to set the Pound on a fresh downtrend, despite such a move being largely anticipated by markets.
Sterling is likely to remain biased to the downside for the foreseeable future, despite the robust second quarter UK GDP result, particularly if domestic lending data for July proves disappointing next week.