British Pound to Euro (GBP/EUR), US Dollar (GBP/USD) Exchange Rate Forecast – Pound Fluctuates before BoE Decision
The British Pound to Euro (GBP/EUR) exchange rate advanced on Tuesday while the British Pound to US Dollar (GBP/USD) currency pair was trading in a narrow range.
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British Pound to Euro (GBP/EUR) Exchange Rate Stronger on UK Services Data, Greek Uncertainty
Over the course of the European session, the British Pound to Euro (GBP/EUR) exchange rate returned to trending above the 1.37 level as demand for the Pound was supported by positive UK services data.
Although UK election concerns continue to weigh on Sterling, the lack of progress in the Greek bailout negotiations has helped the British currency advance on its European peer.
The UK’s Markit Services PMI was also shown to have risen to its strongest level since August 2014 in March.
The index jumped to 58.9 last month, up from 56.7 in February and defying forecasts for a reading of 57.0.
Economist Chris Williamson said of the result; ‘The survey data show employment growth remaining close to record highs and few signs of inflation picking up from its all-time low. The combination of fuller employment and falling prices should support economic growth by providing an important catalyst to higher consumer spending, on which the upturn appears to have become increasingly dependent in recent months. While the data support the view that the next move interest rates will be upward, the lack of inflationary pressures suggests the first hike remains some way off, and probably not this year unless we see some significant upturn in wage growth.’
Pound gains were a little limited as the Bank of England’s (BoE) Financial Policy Committee record highlighted the risks posed to the UK economy by the situation in Greece.
That being said, Sterling remained trending in a stronger position against the Euro despite the publication of fairly encouraging economic reports for the Eurozone.
Markit’s Services/Composite PMIs for Germany both showed improvement, and the Sentix measure of investor confidence increased from 18.6 to 20.
British Pound to US Dollar (GBP/USD) Exchange Rate Struggles Ahead of FOMC Minutes
Although the Pound performed well against the Euro on Tuesday, the British Pound to US Dollar (GBP/USD) currency pair was trending in a narrow range having come off the highs recorded in the immediate aftermath of Friday’s US Non-Farm Payrolls report.
The GBP/USD exchange rate advanced above 1.49 after the US economy was shown to have added considerably fewer-than-forecast positions in March.
While the US unemployment rate held steady, the report did add to bets that the Federal Reserve will refrain from increasing interest rates for the foreseeable future and reduced demand for the ‘Greenback’.
However, with the publication of minutes from the latest Federal Open Market Committee meeting looming, the US Dollar was able to recoup some of its recent losses.
The Fed was a little dovish after its gathering, but the minutes might contain hawkish undertones. If that proves to be the case, we may see the US Dollar push higher against the Pound.
British Pound to Euro (GBP/EUR), US Dollar (GBP/USD) Exchange Rate Forecast: BoE Rate Decision Ahead
The rest of the week’s UK reports are of fairly low importance, leaving much of the Pound’s movements up to global economic developments and political concerns.
The direction taken by the GBP/EUR exchange rate could also depend on the meeting between Greece and Russia.
If it appears that the Hellenic nation is forming some sort of aid agreement with Russia, the Euro would tumble.
As stated above, the FOMC minutes will be the most significant cause of GBP/USD volatility.
Of course, the Bank of England’s (BoE) interest rate announcement will also be of interest – despite the fact that the central bank is unlikely to take any action in the foreseeable future.
The British Pound to Euro (GBP/EUR) exchange rate was trading in the region of 1.3704 while the British Pound to US Dollar (GBP/USD) exchange rate was trading in the region of 1.4882.