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Pound Sterling Forecast: GBP Rate Volatility Expected on Inflation Data

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GBP: Pound Sterling Fluctuates against Majors as Geo-Political Tensions Continue

The Pound has fluctuated against the majors this morning after yesterday’s bout of disappointing UK Trade figures.

This week has been somewhat of a quiet one for UK data. Thursday saw the largest run of stats with the announcement that the UK trade deficit widened by £2bn in June, (-£4564 to -£2516), but markets seemed far more concerned with the situation between North Korea and the US.

If relations with North Korea cool into next week then Sterling could be liable to drop, as markets will likely become less risk averse.

Conversely, any form of escalation will drive demand to safer currencies.

Next week will feature notable releases like the UK’s final inflation figures (due on Tuesday), employment and wage data due Wednesday and retail sales due Thursday.

GBP/EUR: Pound Euro Boosted by Risk Aversion, Hobbled by Positive German Inflation

The Pound fluctuated against the Euro this morning after the release of Germany’s inflation figures, which accelerated exactly as predicted in July, hitting a three-month high.

German consumer prices jumped 1.7% year-on-year, up from the previous annual figure of 1.6%, whilst the month-on-month figure doubled to 0.4%.

As the results were unchanged from previous estimates, their impact on the Euro was limited. Demand for the Euro also remains lacking in the face geopolitical tensions with North Korea..

In slightly less positive news for the Eurozone, Destatis revealed that Germany’s wholesale price inflation grew only 2.2% year-on-year in July, down from 2.5% in June – the weakest growth exhibited since November last year.

The month-on-month figure also disappointed, dropping 0.1%.

The week ahead will feature the release of the Eurozone’s overall inflation and GDP figures.

GBP/USD: Pound US Dollar Limp before US Inflation Figures

The Pound to US Dollar exchange rate remains predominantly limp ahead of this afternoon’s US inflation figures.

Currently the year-on-year inflation figure is expected to come in at 1.8%, up from the previous 1.6%. Should this occur then the Pound US Dollar exchange rate will very likely drop.

Yesterday’s UK trade balance report also hurt the performance of this pairing, as it demonstrated a jump in the UK’s deficit of £2bn.

Notably, the UK’s NIESR gross domestic product estimate came in at 0.2%in the three months to July – down from 0.3% in the previous period. This print was considerably lower than the long term average of 0.5% quarterly growth and caused some market anxiety regarding the potential outcome of next week’s actual UK GDP print.

GBP/CAD: Pound Canadian Dollar Slides as Oil Prices Rise

The Pound to Canadian Dollar exchange rate continued drifting lower this morning after yesterday’s disappointing UK trade data release.

OPEC’s recent announcement that it has upgraded its expectations for global demand sent oil prices rocketing to 11-week highs yesterday, as they estimated that future oil demand would hit 1.37 million barrels a day.

Markets leapt at the news, as they deemed these numbers capable of significantly reducing the global oil glut over the next few years.

GBP/AUD: Pound Australian Dollar Gains as ‘Aussie’ Hurt by Dampened Global Risk Appetite

Demand for the Australian Dollar has remained low lately due to the continuing escalation of tensions between North Korea and the US.

The latest crisis has driven demand away from the volatile ‘Aussie’ towards the safe haven ‘Greenback’, news that has driven GBP AUD higher.

Next Tuesday will feature the release of the Reserve Bank of Australia’s (RBA) August meeting minutes, which markets will, no doubt, study for any sign of change in sentiment.

Ultimately the forecast for this pairing remains dependent on relations between North Korea and the United States. If markets still consider the situation to be risky next week then they will continue to remain invested in safe haven currencies like the US Dollar, Pound and Swiss Franc (CHF)

GBP/NZD: Pound New Zealand Dollar Slides as Markets Buy Bargain ‘Kiwi’

The Pound has pared some of its recent gains against the ‘Kiwi’ Dollar this morning as markets took advantage of the cheaper New Zealand Dollar.

The GBP/NZD exchange rate was also hurt by markets reacting to yesterday’s news that the UK’s trade deficit widened by £2bn.

The pairing has yo-yoed lately after the Reserve Bank of New Zealand’s decision to leave rates on hold at 1.75%. Whilst demand for the ‘Kiwi’ initially grew, it later fell on dovish remarks from RBNZ Assistant Governor John McDermott, who stated that the New Zealand Dollar needs to ‘adjust down’ – a dovish signal to investors.

The most significant data print for the New Zealand Dollar next week will be their fortnightly global dairy trade price index.

The previous auction resulted in a drop in dairy prices of 1.6%. Should a drop in prices occur again