Mixed UK Data Slows Sterling’s Momentum (Matthew Vassallo)

GBP EUR Exchange Rate: Weekly Review July 16  

It’s been a mixed week for Sterling, following some poor UK data releases. The Pound has seen its value drop against most of the major currencies, in particular against the USD & AUD. With heavy loses over the past 48 hours, investors will now questioning whether the Pounds recent momentum has disappeared.

GBP/EUR rates still remain attractive to EUR buyers, with the Pound continuing to float between 1.41-1.42 on the exchange. This is approximately a cent lower than the high earlier this week, with the EUR receiving a boost following better than expected unemployment figures. The Eurozone alos released a host of inflation data that came in above expectation and it did seem as though single currency could put pressure on the 1,40 resistance level over the coming days. This hope has been dampened today, following worse than exported Retail Sales figures and the Pound is now likely to find support around 1.41 for the time being. All eyes will now stitch to today’s European Central Bank 9ECB0 interest rate decision and subsequent monetary policy statement. ECB President Mario Draghi has expressed on-going concerns regarding the low inflation levels and with the market expecting an increase in their current Quantitative Easing (QE) programme to counter these problems, any confirmation of this could cause the EUR to lose value.

GBP/USD rates have dropped below 1.50 and we could now see the Greenback gather further momentum as we head towards the end of the year. As regular readers will know, it has been the focus on when the US Fed would raise interest rates that has been the driving force behind recent USD movement. Head of the FED Janet Yellen was talking yesterday and confirmed that US data had been in line with their expectations since October and this now mean we are very likely to see a rate hikje this month. This is why we have seen the USD gain strength and I now feel it will find support under 1,50 over the coming weeks.

GBP/AUD rates have also dropped dramatically over the past week, with the AUD benefiting from the poor UK data already discussed but also the decision by the Reserve Bank of Australia (RBA) not to cut their interest rates further. This was taken as a sign of strength by the markets and helped boost the AUD’s value, bringing some much needed respite for any clients holding AUD positions. With GBP/AUD rates now trading over 15 cents lower than they were in the summer, I would be very tempted to secure something around the current levels. I do not see the AUD breaking through the 2 barrier, certainly whilst the on-going economic problems in China (Australia’s largest trading partner) continue.

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