The Pound Sterling to Euro (GBP/EUR) and US Dollar (GBP/USD) exchange rates fell on Thursday while the Pound Sterling to New Zealand Dollar (GBP/NZD) gained, after UK House Prices fell.
January saw the annual figure decline from 7.2% to 6.8%, although remained slightly higher than the 6.6% forecast.
Earlier… The Pound Sterling to Euro (GBP/EUR) exchange rate recorded gains while the Pound Sterling to US Dollar (GBP/USD) and New Zealand Dollar (GBP/NZD) exchange rates fell on Wednesday ahead of the Federal Open Market Committee (FOMC) announcement.
The FOMC is likely to be of heavy influence for the US Dollar and any change in language from policymakers could cause US Dollar fluctuations.
Industry expert Steve Englander stated: ‘So we are leaning to the market being surprised on the hawkish side, largely because market pricing has become so dovish. A recent round of client meetings suggests that most investors see the Fed as being patient for a very long time, so any firmness would qualify as a surprise on the anecdotal as well.’
Earlier… The Pound Sterling to Euro (GBP/EUR) exchange rate fell in the early hours of Tuesday’s trading while the Pound Sterling to US Dollar (GBP/USD) and New Zealand Dollar (GBP/NZD) exchange rates gained, ahead of UK Gross Domestic Product (GDP) stats.
UK GDP rose to only 2.7% on the year in the fourth quarter of 2014, falling below the 2.8% forecast.
However, US data disappointed investors on Tuesday when Durable Goods Orders fell by -3.4% instead of the forecast +0.3% growth.
Earlier… The Pound Sterling exchange rate has been trending higher against the US Dollar (GBP/USD) and New Zealand Dollar (GBP/NZD) while softening against the Euro (GBP/EUR), as Bank of England (BoE) representative Kristin Forbes suggested rate hikes could happen sooner than forecast.
Forbes stated: ‘These scenarios, if they occur, would imply an earlier increase in interest rates than currently expected, especially in order to ensure that any subsequent interest rate increases are slow and gradual.’
The Euro fell dramatically as the Greek election took place over the weekend and resulted in anti-austerity party Syriza winning nearly by the majority. Syriza wishes to renegotiate Greek debt rather than continuing on the current path of aggressive austerity and high unemployment.
With uncertainty a major factor surrounding the Euro at the moment, a Grexit could see the Euro depreciate significantly.
UK Chancellor of the Exchequer George Osborne commented on the events, stating: ‘Ultimately if you take at face value all the things that the new Greek government has promised—including big increases in public expenditure—you know, I think that is going to be very difficult to deliver, and incompatible with what the Eurozone currently demands of its members.’
Could Grexit have a Domino Effect and Push Euro (EUR) Exchange Rate Lower?
However, many economists have suggested that the loss of Greece from the Eurozone could lead the way for other struggling nations to make an escape.
Italian EU Affairs Minister Sandro Gozi stated: ‘After this vote we will have new opportunities to pursue change in Europe to create growth and investment and fight against unemployment.’
Meanwhile, the New Zealand Dollar has been a little bearish after New Zealand Credit Card Spending declined in December by -0.6%. The annual ecostat was pulled down from 5.1% to 4.5%. Sunday had seen the New Zealand Performance of Services Index rise from a negatively revised 54.7 to 56.5 in December.
However, one thing likely to weigh heavily of the New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate will be the upcoming Reserve Bank of New Zealand (RBNZ) interest rate announcement.
Investors are speculating that after last week’s dovish Bank of England (BoE) and rate cutting Bank of Canada (BOC), the RBNZ could become neutral in its stance on rate hikes rather than continuing to suggest increases in borrowing costs will continue after last year’s aggressive hiking cycle.
Industry expert Grant Hassell commented: ‘Personally, I think there’s a chance that this might be it for this part of the tightening cycle. [Rate cuts signalled by the overnight interest swap curve] may be a little overdone but it shows the market has changed its mind completely on the RBNZ raising rates any time soon.’
Meanwhile, Westpac are also forecasting the chance of rate cuts.
Westpac chief economist Dominick Stephens stated: ‘We would place roughly 20% odds on two OCR [official cash rate] cuts occurring this year.’
The US Dollar has been bullish in the market in recent months as investors’ price in a US Federal Reserve rate hike in the near future.
This week could see further speculation surround the topic of US borrowing costs, when the Federal Open Market Committee (FOMC) announces its latest interest rate decision. The FOMC is forecast to keep rates on hold at 0.25% but any language change could cause US Dollar to Pound Sterling (USD/GBP) exchange rate movement.
Pound Sterling to Euro (GBP/EUR), US Dollar (GBP/USD) and New Zealand Dollar (GBP/NZD) Exchange Rate Forecast
The Euro to Pound Sterling (EUR/GBP) exchange rate could fluctuate majorly on Thursday and Friday with the release of both German and Eurozone Unemployment Rate and Consumer Price Index (CPI) stats.
The two highly influential pieces of data could cause massive swings in the Pound Sterling to Euro (GBP/EUR) exchange rate—any negative figures could push the Euro significantly lower.
Meanwhile, in addition to the RBNZ interest rate announcement, New Zealand Trade Balance ecostats will emerge on Wednesday and could cause movement in the New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate.
Tuesday could be a big day for both the Pound Sterling and US Dollar when UK Gross Domestic Product (GDP) data is published. At present, the UK economy is expected to have grown by 0.6% in the fourth quarter of 2014. Annual ecostats are predicted to increase from 2.6% to 2.8%.
The US Dollar could also be put under pressure on Tuesday if US Durable Goods Orders don’t print favourably. In addition, US Consumer Confidence will also be published – the index is expected to grow from 92.6 to 95.0.
US GDP is expected on Friday and is forecast to decline from 5.0% to 3.1%. If a drop does occur, the US Dollar to Pound Sterling (USD/GBP) exchange rate could fall.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is residing in the region of 1.5011. The Pound Sterling to New Zealand Dollar (GBP/NZD) currency pair is trending at 2.0155. The Pound Sterling to Euro (GBP/EUR) exchange rate is reaching 1.3371.
