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Exchange Rate Forecast: GBP/EUR, GBP/USD, GBP/TRY, GBP/AUD; UK Growth Drops

April 26, 2018 12:40 pm | Modified September 4, 2018 7:18 am
AUD, EUR, GBP, TRY, USD | BY Ashleigh Fox

The Pound dropped against the Euro (GBP/EUR), US Dollar (GBP/USD), Australian Dollar (GBP/AUD) and Turkish Lira (GBP/TRY) on Friday after UK Gross Domestic Product (GDP) data yielded the weakest reading since 2012. Disappointingly, the UK GDP growth number came in at +0.1% in the first quarter, despite economists forecasting 0.3%. The figure relieves some of the pressure on Bank of England (BoE) policymakers due to make their monetary policy and interest rate decisions in the next few weeks. 

Markets will now be closely watching BoE Governor Mark Carney this afternoon when he’s due to speak, to see if he offers any clues about monetary policy and the impact of the UK growth numbers. While some have suggested that the Beast from the East has caused a dampening of growth, the Office for National Statistics (ONS) is adamant that that isn’t the case. Chancellor of the Exchequer Phillip Hammond has stated that the weather has had an effect.

Update provided 27/04/18 at 10:35am

The Pound is trending higher against the Euro (GBP/EUR), US Dollar (GBP/USD), and Australian Dollar (GBP/AUD), while slightly softer against the Turkish Lira (GBP/TRY) on Thursday.

UK Loans for House Purchase data came in at 37,570 in March, slightly higher than the 37,150 forecast. Additionally, the Confederation of British Industry’s (CBI) Reported Sales figure recovered from -8 in March, to -2 in April, a better-than-forecast result considering experts had expected the number to come in at -3.

Markets Await ECB’s Monetary Policy and Mario Draghi Press Conference for EUR Movement

It’s a big day for the Euro exchange rate, with the European Central Bank (ECB) due to make its latest monetary policy decision. The decision will be followed by a press conference with ECB Chief, Mario Draghi and his words could create some significant EUR movement.

Update: The ECB opted to keep interest rates on hold once again, stating that it would keep rates low ‘well past’ the end of its asset purchase programme which will continue until at least the end of September. The central bank also stated that ‘if necessary’, it would keep buying bonds after September. In response, the Euro has remained off six-week lows.

TCMB Hikes Rates Ahead of Turkish Snap Election; Will the Lira Recover?

On Wednesday, the Central Bank of the Republic of Turkey (TCMB) made its own interest rate decision, keeping rates at 8.0%. However, the Late Liquidity Window Rate increased from 12.75% to 13.50% for the first time in 2018. The increase was in direct opposition from President Recep Tayyip Erdogan’s requests to maintain cheaper interest rates before snap elections take place in June. Turkish Business Confidence took a slight slip this week, with the April index coming in at 111.2 from the previous 111.9.

Last year, Turkey grew by 7.4%, the fastest growth seen by any nation in the Group of 20 (G20), but the Lira hasn’t fared well, instead dropping by around 7% against the US Dollar (TRY/USD) this year. Moreover, if the Lira continues on its downtrend, the central bank could look at increasing interest rates again in the near future.

Economist William Jackson commented:

‘Those kind of growth rates have led to very clear signs of overheating. When the economy is in this state, monetary and fiscal policy need to tighten to take some of the steam out of demand.’

US Durable Goods Orders Ahead

Meanwhile, across the pond, the US Advance Goods Trade Balance and Durable Goods Orders numbers will be released later in the session which could give the US Dollar some reason to move. Economists are expecting the March Durable Goods Orders reading to come in at 1.6%, after February’s 3.0%.

Aussie Import and Export Prices Jump

The Australian Dollar has had little by way of influential data to create movement, but the Latest Australian Import and Export Price Indexes were out in the Antipodean session. The first quarter Import Price Index rose by 2.1% quarter-on-quarter. The Export Price Index climbed by a healthier 4.9%, a big jump from the previous 2.8%.

The Pound to the Australian Dollar (GBP/AUD) exchange rate is trending at 1.8415. The Pound to Turkish Lira (GBP/TRY) exchange rate is at 5.6835. The Pound to US Dollar (GBP/USD) exchange rate is in the region of 1.3959. The Pound to Euro (GBP/EUR) exchange rate is trading at levels of 1.1458.

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