3 exchange rate moving developments to watch out for this week – UK GDP, Eurozone CPI and FOMC rate decision
A lack of influential data for the first half of the week left much of the movement in the GBP/EUR and GBP/USD exchange rates up to the lingering impact of the previous week’s Greek developments and interest-rate related comments from the BoE and Federal Reserve.
However, things really heated up on Wednesday and the pound sterling to euro (GBP/EUR) exchange rate briefly returned to trending at an almost eight-year high of 1.44 in response to the Bank of England (BoE) meeting minutes. While the minutes indicated that none of the nine-member Monetary Policy Committee (MPC) were prepared to push for higher borrowing costs with the situation in Greece so uncertain, the fact that the odds of a Grexit have dropped dramatically since the BoE gathering took place led economists to believe that a split vote is likely to occur in August. The GBP/EUR and GBP/USD exchange rates subsequently rallied – although gains proved short lived.
With Greece moving a step closer to unlocking its third bailout and the UK’s retail numbers coming in well below forecast levels, the sterling swiftly retreated against the euro (dropping all the way back to 1.41) and was left trending in the region of 1.55 against the US dollar.
Next week’s UK reports will have to impress if the pound is to return to its recent highs against two of its main currency counterparts.
These are the three main currency market-moving events of the week ahead:
UK Q2 GDP to impact BoE interest rate hike projections and pound sterling (GBP) exchange rate
Of all the UK ecostats due out next week, the UK’s growth data for the three months through June may have the biggest impact on the pound sterling exchange rate trading. In the first quarter, the UK recorded fairly dismal quarter-on-quarter growth of just 0.4 percent. If the rate of UK economic output is shown to have accelerated in the second quarter, it will lend credence to predictions that the BoE will increase interest rates from their current record lows at the turn of the year. An impressive GDP figure has the potential to drive the pound higher against both the euro and US dollar.
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.
FOMC interest rate announcement may spark US dollar surge
Recent commentary from both BoE and Federal Reserve policymakers has left investors betting that the two major central banks will adjust interest rates at around the same time. However, if the Federal Open Market Committee (FOMC) delivers a particularly hawkish policy statement next week and indicates that a September revision is still on the cards, the US dollar could rally across the board and push the pound back to the 1.53/1.54 level. US Consumer Confidence and Durable Goods Orders data is also likely to influence the direction taken by the ‘Greenback’ over the next five days.
Eurozone Consumer Price Index (CPI) to drive euro movement
Now that Greece isn’t dominating the headlines to the extent it was earlier this month, ecostats from the currency bloc will return to being the driving force behind euro movement. While several high-profile reports from Germany, including the nation’s employment and retail sales numbers, can be expected to have an influence on demand for the euro, the Eurozone’s Consumer Price Index (CPI) may also have a considerable impact on EUR/GBP, EUR/USD trading. An acceleration in inflation from the 0.2 percent annual rate recorded in June would be euro-supportive, but a move back towards 0.0percent inflation would put the common currency under pressure.
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
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