This week, the Pound exchange rate managed to reach a three-week high versus the US Dollar (GBP/USD), hitting highs of $1.3176. Brexit optimism boosted the British currency as it seemed a deal could be close. However, things took a downturn by the end of the week as the Irish border issue reared its head once again. Additionally, Friday saw Transport Minister Jo Johnson resign on account of UK Prime Minister Theresa May’s Brexit plan. He also suggested there should be another referendum.
GBP/EUR, GBP/USD Exchange Rate Forecast
In the week ahead there are plenty of factors that could influence the Pound to Euro (GBP/EUR) and Pound to US Dollar (GBP/USD) exchange rates. Influential UK labour market will be out on Tuesday, including the important Average Weekly Earnings and Employment Change numbers. A rise in weekly wages could prove to be a positive event for Sterling, but a decline could put more pressure on the British currency. Meanwhile, critical UK inflation numbers will be revealed on Wednesday.
Euro Exchange Rate Awaiting Economic Sentiment Data
For the Euro, this week saw the European Commission put some pressure on the common currency when it warned that activity and growth in the Euro Area may experience a downturn in coming years. In the week ahead Eurozone Economic Sentiment numbers will be out on Tuesday, followed by Eurozone Gross Domestic Product (GDP) growth readings on Wednesday, and the currency bloc’s final inflation print on Friday.
US Dollar Forecast to Fluctuate on Federal Reserve Powell’s Comments
The US Dollar might have started the week on the back foot, but by the end of the week had managed to recoup some losses when the Fed indicated it would continue hiking interest rates gradually. The US midterms caused some uncertainty as US President Donald Trump suffered a hit when the Democrats took control of the House of Representatives. The week ahead could hold more market movements with highly influential inflation data reaching markets on Wednesday. Fed Chair Jerome Powell will speak on Wednesday as well, which could create USD/GBP and USD/EUR exchange rate movement. US Advance Retail Sales numbers will also be released on Thursday.
Brexit is likely to be one of the most significant drivers of Sterling in the near future, meaning the GBP/EUR and GBP/USD exchange rates could experience some significant movement on account of political developments.