GBP/EUR AND GBP/USD EXCHANGE RATES FORECAST; SOFTER TRADE AHEAD OF FOMC MINUTES
On Monday the Pound to Euro (GBP/EUR) and Pound to US Dollar (GBP/USD) exchange rates softened during the European session as concerns that the British currency might be overvalued saw it slide against several of its most traded currency counterparts.
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The Pound to Euro exchange rate fell by almost 0.2% in spite of less-than-impressive German data and the Pound to US Dollar exchange rate also slid by 0.2%.
Last week two high-profile Bank of England officials commented on the subject of UK inflation and the prospect of interest rate increases, with Deputy Governor Ben Bernanke asserting that the UK economy isn’t yet strong enough to support higher borrowing costs.
This week, the Pound came under pressure as Business Secretary Vince Cable asserted; ‘We are also getting back into exchange rate issues. Arguably the Pound is overvalued by 10%-15% on a trade-weighted basis. Any company having to compete externally on price is struggling for that reason. This feeds back into monetary policy and Bank of England interest rates. It’s a significant problem’.
The remarks saw Sterling wilt against the majority of its currency counterparts.
The Pound to Euro (GBP/EUR) exchange rate fell to a low of 1.2716.
The Pound to US Dollar (GBP/USD) exchange rate fell to a low of 0.6254.
Last week the UK published a mixed bag of economic reports, resulting in speculation that the pace of UK growth might be slowing.
While second quarter GDP was positively revised and Construction PMI impressed, Services and Manufacturing PMI both fell. In a statement issued with the figures, Markit economist Chris Williamson noted; ‘The PMI surveys are collectively signalling GDP growth of 0.8% in the third quarter, down from 0.9% in the three months to June but still strong by historical standards. However, the pace of expansion hit a six-month low in September and is showing signs of moderating further as we move towards the end of the year’.
Today’s GBP/EUR and GBP/USD Exchange Rate Forecast
In the hours ahead both the Pound to Euro (GBP/EUR) and Pound to US Dollar (GBP/USD) exchange rates are likely to experience volatility in response to a range of economic reports.
The UK data to be most aware of includes Halifax House Price figures for the three months to September, the Bank of England’s Credit Conditions Survey, UK Industrial/Manufacturing Production stats and the National Institute of Economic and Social Research’s growth estimate for September.
It is expected that industrial production stagnated on the month in August after increasing by 0.5% in July. Manufacturing production is believed to have increased by 0.1% month-on-month in August, down from the previous month’s 0.3% gain. Better-than-expected results in these areas would have the potential to push the Pound higher against the common currency and ‘Greenback’.
The GBP/EUR exchange rate could also fluctuate as a result of Germany’s Industrial Production figures and the statements of several European Central Bank officials.
Meanwhile, the GBP/USD exchange rate could react to the US Consumer Credit figures.
The British Pound is currently trading against the Euro in the region of 1.2734 and trading against the US Dollar in the region of 1.6002
The Pound was experiencing mixed trade against the Euro and US Dollar on Wednesday as economists look ahead to the evenings Federal Reserve policy meeting.
Early in the session, the Pound eased to a three-week low against the Euro despite the release of more poor economic data out of Germany and as the International Monetary Fund highlighted the weakening Eurozone as one of the world’s weak spots.
Against the US Dollar, the Pound softened as investors raised their bets that the minutes of the latest Federal Reserve policy meeting will show that policy makers are edging closer to raising interest rates.