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EUR, GBP, USD exchange rate developments to watch this week

The pound rose to within touching distance of a fresh seven-year high against the euro last week (achieving 1.4383) and also approached the 1.57 level against the US dollar ahead of the hotly anticipated ‘Super Thursday’ of Bank of England (BoE) announcements.  

Even below forecast PMIs for the UK’s Manufacturing and Services sectors weren’t enough to stymie pound gains amid hopes that the BoE would hint at the likelihood of interest rates being revised in 2015. However, the Central Bank failed to take the hawkish stance investors had prepped for and the pound fell across the board after the BoE cut its inflation forecasts and the minutes from the institution’s interest rate meeting revealed that only one of the nine-member Monetary Policy Committee voted in favour of an immediate adjustment to borrowing costs.  

It had been speculated that as many as three policymakers would vote for a revision. The disappointing news sent the pound trending lower across the board and the currency dropped back to 1.42 against the euro and 1.55 against the US dollar. With interest rate hike speculation heating up, upcoming data releases are likely to have a notable impact on currency market movement.  

So, what should we be looking out for this week?  

GBP exchange rate could recover losses if UK earnings rise 

There isn’t much in the way of UK data to be aware of in the coming week, but the nation is set to publish its potentially influential employment figures.  

If Britain adds a respectable number of positions in the three months through June and sees a decline in the unemployment rate, BoE interest rate hike speculation will be stoked once again and the pound may be able to recover some of the losses accrued in response to ‘Super Thursday.’  

UK wage data will also be influential. Average earnings excluding bonuses climbed by 2.8 percent in the three months through May, but a further increase would bolster sterling demand.  

Recent events have shown how volatile exchange rates can be. Look into registering for regular market updates if you want to stay up-to-date with the latest market movements.  

ZEW sentiment surveys to influence EUR exchange rate trading  

The euro came under a little pressure this week as a report conducted by the National Institute for Economic and Social Research (NIESR) contained negative revisions to the global growth forecast and a fairly damning assessment of the Greek economic outlook.  

However, Greek PM Alexis Tsipras is insistent that Greece is close to unlocking vital bailout funds and with (some) time still to spare before the nation must make a repayment to the European Central Bank (ECB) ecostats from the Eurozone are likely to be the primary cause of euro fluctuations.  

Of next week’s numbers the most noteworthy are likely to be the ZEW economic sentiment surveys for Germany and the Eurozone.  

Improving confidence would be euro-supportive and help the common currency continue moving away from its recent multi-year low. Conversely, a slide in sentiment may limit demand for the Euro.  

Advance US retail sales data to be key cause of US dollar conversion rate shifts   

As recent economic reports for both the UK and US have fallen short of the mark, the Federal Reserve and Bank of England are now looking almost neck-and-neck when it comes to which central bank is going to increase borrowing costs first.  

Any ecostats which strengthen the Fed’s position and make a 2015 adjustment the most likely scenario are likely to give the ‘Greenback’ a nice boost and put the pound under pressure.  

The US Advance Retail Sales report will have its usual impact on the domestic currency, with an increase in consumer spending being well received but a decline potentially weakening the US dollar.  

Retail sales in the world’s largest economy are believed to have increased by 0.4 percent in July following the -0.3 percent decline recorded in June. Another disappointing result could send ‘Cable’ trending higher.  

Exchange rate movements can be swift and dramatic, so if you’ve got a currency requirement coming up and want to move your funds at the right time you may want to have a chat with a currency specialist.  


Contributed by TorFX

TorFX is a specialist currency broker that offers far better exchange rates than you are likely to receive from a high street bank.