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

Currency exchange rates this week are likely to be affected by the BoE interest rate decision, US non-farm payrolls, and greek bailout. 

The pound put on a fairly impressive performance this week, rallying back above 1.43 against the euro and trending around the 1.56 level against the US dollar. While sterling was supported by positive UK growth and mortgage approvals data, the euro was pressured lower by mixed domestic data and Greek developments and the US dollar fluctuated as a result of FOMC interest rate hike speculation.

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

BoE interest rate decision could boost pound sterling (GBP) exchange rate if the vote is split

Although the upcoming Bank of England (BoE) interest rate decision isn’t likely to have much of an impact on pound sterling (GBP) exchange rate trading immediately after the event, given that we could put money on no policy adjustments being made, investors will be eagerly awaiting the publication of minutes from the gathering.

If the minutes reveal that the nine-member Monetary Policy Committee (MPC) was split on the subject of when to raise borrowing costs, with one or more members voting for an immediate adjustment, it will up the odds of the BoE increasing interest rates before the end of this year, or at the very beginning of next.

Given that the minutes aren’t due for publication until Wednesday 19 August, next week’s UK Markit Manufacturing/Construction/Services PMIs are more likely to be driving GBP demand next week.

Signs of improving growth in these sectors would be well received and lend the pound additional support. 

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.

US non-farm payrolls to prompt US dollar currency movement

Although both the ISM manufacturing and non-manufacturing measures are scheduled for publication next week, any US dollar movement inspired by the data is likely to be limited ahead of Friday’s highly influential US non-farm payrolls numbers.

At the moment industry experts’ forecasts regarding the first increase to US borrowing costs are torn between September and December. This latest batch of jobs data could be the deciding factor in the issue, with an impressive jobs gain or increase in average earnings encouraging the Fed to adjust borrowing costs earlier while a subpar report may see them put their plans on hold until the end of the year.

Delayed rate hikes would drive the ‘Greenback’ lower but as it stands economists believe the US economy added 215,700 positions in July, less than the gain recorded the previous month but enough to keep the nation’s unemployment rate at 5.3 percent.

Average earnings numbers will be equally important in terms of influencing the direction taken by the ‘Greenback’.

Greek debt deal back in the spotlight

The situation in Greece is currently a lot calmer than it was only a couple of weeks ago, but that doesn’t mean the Hellenic nation’s tribulations are over.

Recently reports of a secret plot to duplicate the Greek banking system in readiness for leaving the euro were unearthed and PM Alexis Tsipras has also inferred that a lack of support from his own party could result in elections being called early – so stability is hardly assured.

Given that Greece is due to make a repayment to the European Central Bank (ECB) in August, the nation needs to unlock its third bailout quickly. Any delays or setbacks to negotiations next week could have a detrimental impact on the appeal of the euro and potentially drive the GBP/EUR pairing back to recent eight-year highs. 

Exchange rate movements can be swift and dramatic, so if you have 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.