EXCHANGE RATE FORECAST: GBP ADVANCES AGAINST USD,EUR,AUD,CAD
Pound Sterling (GBP) Forecast
After bombing on Tuesday in response to a sharper-than-forecast decline in the pace of UK inflation, the Pound Sterling exchange rate was able to recover ground on Wednesday. While Sterling continued trending lower against the Euro and Australian Dollar (amid bets that the Bank of England will be pushing back the first increase in interest rates) the British currency was able to advance on the US Dollar and Canadian Dollar.
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The rate of UK unemployment was shown to have fallen to its lowest level since the global economic crisis was triggered by the Lehman Brothers collapse in 2008. The jobless level declined to 6% after the UK added 46,000 positions, but Pound gains were limited by concerning average wage growth figures and a slowing in the pace of job growth.
If BoE policy maker Martin Weale is less hawkish than formally when he delivers his speech later today the GBP exchange rate could slide.
US Dollar (USD) Forecast
The US Dollar began the European session trading bullishly against the majority of its peers as global growth concerns and falling oil prices pushed investors towards safe-haven assets like the ‘Greenback’.
However, during the North American session the US Dollar fell against the Pound (USD/GBP) and Euro (USD/EUR) following the release of disappointing US Advance Retail Sales figures.
Economists had expected that retail sales would fall by 0.1% in September after advancing by 0.6% the previous month, but sales growth actually slowed by -0.3%. The report indicates that consumers are becoming more cautious, a negative for a consumer-driven economy like the US.
As stated by economist Omair Sharif; ‘The pickup in consumption that we’re all waiting for hasn’t quite taken off yet. The fact that real wages and salaries haven’t picked up that dramatically, it puts a ceiling on how much spending can accelerate.’
Euro (EUR) Forecast
Although concerns that Germany could be on the verge of a technical recession have put the Euro under pressure in recent days, the common currency recouped losses against the US Dollar (EUR/USD) on Wednesday as US Retail Sales figures fell short.
The Euro even rebounded against the Pound despite the UK’s above-forecast employment data. Also on Wednesday it emerged that Germany is still fighting the European Central Bank’s plans to implement quantitative easing to shore up growth in the Eurozone. QE is extremely unpopular in Germany, and Chancellor Angela Merkel continues to fight her corner.
Australian Dollar (AUD) Forecast
Earlier in the week positive Chinese trade data and bets that the People’s Bank of China will introduce additional stimulus measures bolstered the commodity-driven Australian Dollar.
The ‘Aussie’s bullish run against the US Dollar (AUD/USD) continued on Wednesday as Australia’s Westpac Consumer Confidence report showed improvement and US Retail Sales declined by more-than-forecast.
Australia’s Consumer Inflation Expectation report could be responsible for further Australian Dollar movement during the Australasian session.
Canadian Dollar (CAD) Forecast
The Canadian Dollar slumped to a five-year low against the US Dollar (CAD/USD) on Wednesday in spite of an unfavourable US retail sales report as the downtrend in oil prices continued. As crude oil is Canada’s main export, the slump in value could have an adverse impact on the nation’s economic performance and the ‘Loonie’ has declined accordingly.
The Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate also softened during the local session.
The GBP exchange rate advanced against the USD, EUR, AUD , CAD and other major peers on Thursday after Bank of England policy maker Martin Weale repeated his call for the bank to raise interest rates.
Despite a run of slowing economic data reports Weale believes that Wednesday’s positive unemployment data indicates that wages will begin to rise more rapidly.
Wage growth was mentioned as a key factor on the decision as to when rates should be increased.
Weale’s comments bolstered the Pound as traders raised their bets that upcoming BoE minutes will show that some policy makers are still in favour of raising rates sooner rather than later.