The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending slightly lower in Tuesday’s European session despite UK inflation registering a rise. The Pound Sterling to Euro (GBP/EUR) exchange rate remained in a narrow range after ZEW survey’s printed unfavourably and the situation in Greece rumbled on.
UK Consumer Price Index (CPI) Escapes Deflation, Pound Sterling (GBP) Exchange Rate Stable
The UK Consumer Price Index (CPI) managed to exit deflation in May, climbing from -0.1% to 0.1% on the year. Additionally, the core UK inflation gauge advanced from 0.8% to 0.9% in May, a shade below the 1.0% forecast.
Office for National Statistics representative Philip Gooding commented: ‘Last month CPI turned negative, mainly because of falling transport fares due to the timing of Easter. This month, that fall has been reversed.’
BoE Minutes, UK Employment Change and Unemployment Rate Data Forecast to cause Major GBP/EUR, GBP/USD Exchange Rate Swings
The Bank of England (BoE) has suggested that inflation is likely to remain soft in the short-term after a tumble in oil prices pressured global inflation lower. However, Wednesday’s BoE meeting minutes may allow the Pound Sterling (GBP) exchange rate to climb if a policymaker divergence occurred on the topic of interest rate hikes.
Additionally, Wednesday will see the UK release a whole host of labour market ecostats which could cause some massive Pound Sterling (GBP) exchange rate swings. The UK Employment Change and Unemployment Rate data could cause the Pound (GBP) exchange rate to rally if favourable.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trending in the region of 1.5567.
The Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the region of 1.3827.
US Dollar (USD) Exchange Rate Forecast for FOMC Interest Rate Announcement Fluctuations
Meanwhile the US Dollar (USD) exchange rate will also be in for an interesting day on Wednesday with the Federal Open Market Committee (FOMC) due to make its own interest rate announcement. The Federal Reserve is unlikely to adjust interest rates until at least September, but the follow-up statements could cause some major US Dollar (USD) exchange rate movement.
Tuesday will see the release of US Building Permits and US Housing Starts ecostats which could offer the US Dollar to Pound Sterling (USD/GBP) and US Dollar to Euro (USD/EUR) exchange rates some moderate fluctuations.
Thursday will be another big day for the US Dollar (USD) with the release of the US Consumer Price Index for the month of May. A rise in inflation could see a surge in investor sentiment as bets are placed on a Federal Reserve interest rate hike.
The US Dollar to Euro (USD/EUR) exchange rate is trending at 0.8883.
The US Dollar to Pound Sterling (USD/GBP) exchange rate is trending in the region of 0.6424.
Euro (EUR) Exchange Rate Offered Little Support from ZEW Surveys
The Euro (EUR) exchange rate has been significantly pressured by the situation in Greece since negotiations began in January. Tuesday also saw the release of some unfavourable Eurozone data, such as the ZEW German Economic Sentiment Survey which collapsed from 41.9 to 31.5 in June.
ZEW President Professor Clemens Fuest commented: ‘External factors are reducing the scope for further improvement of Germany’s good economic situation. These include, in particular, the ongoing uncertainty over Greece’s future and the restrained dynamic of the global economy.’
Additionally, the German Current Situation survey fell from 65.7 to 62.9, and the Eurozone Economic Sentiment Survey dropped from 61.2 to 53.7.
The Euro to US Dollar (EUR/USD) exchange rate is trending at 1.1254.
The Euro to Pound Sterling (EUR/GBP) exchange rate is trending at 0.7232.