Pound Sterling Exchange Rate News: GBP Fluctuates on Absence of Data, BoE Uncertainty
Positive UK Labour Market Data May Pressure BoE into Hiking Rates
With a complete absence of domestic data on Thursday to influence changes, the Pound Sterling fluctuated versus its major peers in response to market volatility. A slight lean towards appreciation, however, can be attributed to positive sentiment following yesterday’s labour market data.
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The Pound rallied after Unemployment dropped to the lowest level in 7-years, and continues to hold a position of comparative strength on Thursday. In addition, robust wage growth supported demand for the Pound despite missing estimates. With inflation in negative territory, real wages are now in and around the levels seen prior to the financial crisis.
With the domestic labour market data improving, the Bank of England (BoE) Monetary Policy Committee (MPC) will likely be pressured into considering hiking the benchmark interest rate. However, prospects of long delays to a Federal Reserve rate hike and the absence of domestic price pressures will likely overshadow the positive labour market conditions.
Fed Uncertainty is BoE Uncertainty
US data is having a particularly marked influence on the British Pound of late. This is because most economists agree that the BoE will avoid hiking the overnight cash rate ahead of the Federal Reserve. With Fed officials giving divergent speeches, and with fears surrounding the likelihood of China’s economic slowdown, uncertainty is likely to see subdued Sterling trade.
Shanghai Composite Index Rises
Another supportive ecostat for the Pound was the Shanghai Composite Index which ended Thursday’s Asian session 2.3% higher. This wiped off losses of 0.9% seen yesterday. Improving Chinese stocks are important for Sterling traders after Chancellor George Osborne announced the government’s intentions to merge the Chinese and British equity markets. However, many traders are concerned that this is a foolish move as greater exposure to the world’s second-largest economy is not advisable during a period of economic struggles.
Pound Sterling Exchange Rate Forecast to Trend Statically according to BoA Merrill Lynch
Analysts at Bank of America Merrill Lynch predict that the Pound will see quiet trade over the coming weeks now that the post-election rally has corrected. One of the main causes of static trade is uncertainty, and with central bank rate hike and political uncertainty coming to the fore, the Pound is likely to trade statically. ‘The current market environment, with a distinct lack of focus on UK data, suggests that GBP will be beholden to global financial market developments as the pound has effectively decoupled from broader UK data trends,’ stated BoA analysts.
Pound Sterling Exchange Rates Today
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3563.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5476.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 2.1147.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is currently trending in the region of 2.2564.