Pound Exchange Rate Forecast – GBP/USD Static, GBP/EUR Gains, BoE Minutes Could Bolster
The Pound has been struggling against other majors in recent weeks as a string of unfavourable data was released from the UK. However, in Friday’s early European session Sterling witnessed losses against the majority of other majors following statements from Bank of England (BoE) Chief Economist Andrew Haldane.
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Haldane stated he felt less optimistic about the UK economic growth than he did a few months ago. The BoE official commented: ‘Put in rather plainer English, I am gloomier. I’m a bit less on the front foot than I was three months ago. The weather’s got cooler. In the global economy, certainly we’ve seen some of the energy of the recovery reduced, we’ve seen global growth prospects revised down a bit and here in the UK we’ve seen inflationary pressures from wages but also from oil prices, from commodity prices also heading south.’
Haldane quashed investor bets for a rate hike in-between now and spring as previously expected. Low wage growth has been a continuing problem for the UK economic recovery; however, unemployment hovered at a six-year low this week falling to 6.0%.
The recent economic data releases ‘implies interest rates could remain lower for longer certainly than I had expected three months ago’ Haldane said.
Wednesday will see the Bank of England’s meeting minutes released which will reveal the outcome of the latest Monetary Policy Committee (MPC) vote. In the last two months policymakers have diverged, with two of the nine voting in favour of rate hikes. If the minutes show any additional BoE hawks, the Pound could rally.
However, despite falling early in the European session, Sterling was able to advance against other majors such as the Euro (GBP/EUR), Australian Dollar (GBP/AUD), and safe-haven Swiss Franc (GBP/CHF).
The European Central Bank (ECB) announced on Friday that a lack of government effort in expanding the economy was hindering any growth in the Eurozone. ECB Executive Board member Benoit Coeuré commented: ‘Talking vaguely about structural reforms but not doing them, is the worst of all worlds.’
Furthermore, Switzerland cut growth forecasts as the Eurozone’s infectious fatigue has spread to other countries.
Another exchange rate that suffered losses on Friday was the US Dollar (USD). The ‘Buck’ softened as investors readjusted their bets on the Federal Reserve hiking interest rates at any point in the near future. Fed President James Bullard suggested on Friday that the central bank should continue their bond buying program which is scheduled to end this month.
Quantitative easing has been in place to help boost the economy; however, Bullard believes without continuation of the stimulus measure until December inflation expectations could be shaken.
Bullard said: ‘Inflation expectations are dropping in the US, and that is something that a central bank cannot abide. We have to make sure that inflation, inflation expectations remain near our target, and for that reason, I think a reasonable response of the Fed in this situation would be to invoke the clause on the taper that said that the taper was data-dependent.’
Pound (GBP) Exchange Rate Forecast
Looking ahead to next week, Tuesday will see the release of UK Public Finances and Public Sector Net Borrowing figures, and Thursday will reveal Retail Sales. Gross Domestic Product stats are out on Friday, which were residing at 3.2% on the year in the second quarter.