The Pound to Euro (GBP/EUR) and Pound to US Dollar (GBP/USD) exchange rates are forecast to fall further as the outcome of the Bank of England (BoE) and European Central Bank (ECB) policy meetings draw closer.
Disappointing economic data out of Germany, the Eurozone’s largest economy increased calls for the ECB to take more action to stimulate growth and tackle the threat of deflation. The Organisation for Economic Cooperation and Development (OECD) called for the ECB to introduce significant monetary easing measures.
The data showed that German factory orders increased less than expected last month. Orders rose by just 0.8%, well below expectations for a rise of 2.3%. On an annual basis, factory orders fell by 1%.
‘Overall the Euro area is grinding to standstill and poses a major risk to world growth as unemployment remains high and inflation is persistently far from target. The Euro area faces an increasing risk of stagnation. The ECB should expand its monetary support beyond current announced measures, building on positive effects to date. This should include a commitment to sizable asset purchases until inflation is back on track,’ said OECD Chief Economist Catherine Mann.
Most economists are expecting the ECB to leave interest rates unchanged at the record low level of 0.05% but will be hoping that ECB President Mario Draghi will offer reassurance that the bank is prepared to implement additional stimulus measures if necessary.
The Pound was under pressure after a report showed that house prices fell unexpectedly in October but further losses were restrained after data showed that manufacturing and industrial production increased more than forecast in September.
Pound Restrained before BoE meeting
Economists are expecting Bank of England policy makers to leave interest rates unchanged at 0.5% and leave its monthly bond-buying programme at £375 billion. Policy makers are likely to reaffirm their commitment to leaving rates unchanged due to concerns over the global economy.
Against the US Dollar, the Pound is edging closer to its lowest level in a year as the American currency continues to be supported by strong employment data.
‘There are still clear downside risks to Sterling. Now we have a slower housing market, no end in sight to the compression in real wages and there is no inflationary pressure out there. There are fewer reasons now than there have been all year to start thinking about raising rates,’ said Neil Mellor, from Bank of New York Mellon.
Pound to Euro Higher, Pound to US Dollar Exchange Rate Lower
The Pound strengthened against the Euro to push back above the 1.28 level after the European Central Bank (ECB) President Mario Draghi told reporters at a press conference in Frankfurt that ECB policy makers are unanimous in their commitment to expand stimulus “should it become necessary to further address risks of too prolonged a period of low inflation.’’ Their measures will move the ECB’s balance sheet toward early-2012 levels, he said. It earlier decided to keep interest at the record low level of 0.05%.
The US Dollar meanwhile advanced against the Pound to come close to a one-year high after the release of more positive US data. According to the Washington based Labour Department fewer Americans than expected filed for unemployment benefits, adding to signs that the nations Labour Department is continuing to strengthen. First-time jobless claims dropped 10,000 to a three-week low of 278,000 in the week ended Nov. 1, economists had been expecting a figure of 285,000. The four-week moving average, a less-volatile measure of job cuts, reached the lowest level in more than 14 years. Also adding to the strength of the ‘Greenback’ was a separate report which showed that productivity increased strongly in the third quarter of the year.
Pound to Euro Exchange Rate Softens, Pound to US Dollar Exchange Rate Forecast to Fall Further
The GBP/EUR exchange rate softened on Friday as economist forecast that upcoming UK trade data will disappoint. The decision by the Bank of England to leave interest rates on hold at the record low level of 0.5% also caused economists to raise their bets that the BoE will not raise interest rates until the middle of 2015 at the earliest.
The US Dollar continued to find support against the Pound as Thursdays data released by the U.S. Department of Labor showed that the number of individuals filing for initial jobless benefits in the week ending November 1 declined by 10,000 to 278,000 from the previous week’s revised total of 288,000. Analysts had expected jobless claims to fall by 3,000 to 285,000 last week.
The eagerly anticipated Non-farm payrolls report due later in Friday’s session is expected to send the US Dollar higher against its major peers and could send the GBP/USD exchange rate to its lowest level in more than 13 months.
Pound to Euro Exchange Rate Softer, Pound to US Dollar Exchange Rate at 14-Month Low
The Pound declined against the Euro after the latest UK trade data showed that the nation’s trade deficit widened more than expected in September. According to the Office for National Statistics said the U.K. trade deficit widened to £9.82 billion in September from £8.95 billion in August, whose figure was revised from a previously estimated deficit of £9.10 billion. Against the US Dollar the Pound declined to a fresh 14-month low as traders took positions ahead of the release of the latest US NonFarm Payrolls data. The report is forecast to show that the USA’s job market continued to strengthen strongly last month.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.5842,
Pound Sterling,,Euro,1.2752 ,
Pound Sterling,,Australian Dollar,1.8389 ,
Pound Sterling,,New Zealand Dollar,2.0501 ,
US Dollar,,Pound Sterling,0.6312 ,
Euro,, Pound Sterling ,0.7840 ,
Australian Dollar,, Pound Sterling ,0.5438,
New Zealand Dollar,, Pound Sterling,0.4878 ,
[/table]
