Pound Sterling (GBP) Trends Higher ahead of UK Construction Output Data
Correctional trading has helped to shore up Pound Sterling (GBP) this morning ahead of the latest UK Construction Output figures, with investors anticipating a strong uptick in productivity. As a result the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates have been retaking ground on Friday morning.
Earlier…
Bearishness continues to dominate the outlook of Pound Sterling (GBP) as the Euro (EUR) and US Dollar (USD) benefit from increased market risk aversion.
Pound Sterling (GBP) Exchange Rate Fails to Rally with Weaker House Price Balance
Pound Sterling (GBP) has continued to soften against the majors today as investors remain lacking in a sufficient incentive to buy back into the ailing currency. Following Wednesday’s unexpectedly poor Industrial Production report and weaker NIESR GDP estimate the Pound has trended lower across the board, with pundits pushing back their expectations for the start of the Bank of England’s (BoE) monetary tightening cycle. This assessment was not discouraged as this morning’s RICS House Price Balance fell short of forecast, clocking in at 49% rather than 52%, with traders taking little comfort from the indication that the domestic housing market is cooling.
The latest UK Construction Output figures may help to spur a Pound rally, however, if output is shown to have strengthened substantially on the year in December. With sentiment as bearish as it is, any signs of better economic health are likely to boost the appeal of Sterling.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Boosted by Surprise Riksbank Rate Cut Today
Although domestic economic data for the Eurozone was lacking on Thursday the Euro (EUR) went on a bullish run against rivals, as yesterday’s mild market rally rapidly petered out. While safe-haven demand has been pushing the single currency higher today, it received an extra boost from the Riksbank’s surprise decision to aggressively cut interest rates. Cutting the headline rate from -0.35% to -0.50%, this move appears to be a pre-emptive counter to the European Central Bank’s (ECB) expected loosening of monetary policy in March. In spite of concerns that this could herald the start of a European currency war, the move nevertheless shored up demand for the common currency.
This afternoon’s Eurogroup meeting has failed to spark any particular resurgence of anxieties over the economic futures of Portugal or Greece, with finance ministers expressing relative confidence. However, if tomorrow’s raft of Eurozone GDP results demonstrate that growth within the currency union slowed in the fourth quarter the Euro may struggle to maintain its recent gains ahead of the weekend.
US Dollar Currency News: USD Outlook Mixed as Possibility of Fed Rate Hike Remains Open
Testimony from Fed Chair Janet Yellen provoked something of a mixed response from the US Dollar (USD), with the policymaker taking a somewhat more neutral approach than investors had hoped. While Yellen acknowledged that global economic conditions were less conducive to monetary tightening at the start of 2016 she equally emphasised the stronger fundamentals underlying the US economy, failing to decisively rule out the possibility of another interest rate hike in the near future. As a result the ‘Greenback’ initially rallied strongly across the board, before ceding back some of its gains as a general air of uncertainty prevailed.
Friday’s Advance Retail Sales and University of Michigan Confidence Index could strengthen the US Dollar more convincingly if both demonstrate a firming of domestic economic conditions. Pundits anticipate that January saw a general improvement in consumer sentiment, in spite of wider market turmoil, a result which would support the Fed’s more positive assessment.
Current GBP, EUR, USD Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was slumped at 1.2777, while the Pound Sterling to US Dollar (GBP/USD) pairing was trending lower around 1.4471. Meanwhile the Euro to US Dollar (EUR/USD) exchange rate was making gains in the region of 1.1324.
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