The Pound to Euro (GBP/EUR), US Dollar (GBP/USD), and Australian Dollar (GBP/AUD) exchange rates could have plenty of opportunities to move in the week ahead with heightened levels of volatility expected. Ongoing political uncertainty in the UK over Brexit will likely create chances for GBP/EUR, GBP/USD, and GBP/AUD fluctuations, and any serious developments could see some sharp movements.
Monday – Eurozone Inflation in Focus
Eurozone Consumer Price Index (CPI) data will be out on Monday, detailing November’s levels of inflation. Forecasts suggest a fall from 2.2% to 2.0% could take place, which would be the weakest reading since June. The European Central Bank (ECB) has warned of a slowing economy in the last week, and a fall below forecasts could be detrimental for the common currency exchange rate, and rate hike expectations.
Tuesday – Eyes turn to Federal Reserve Monetary Policy
Pessimism in global trade could pressure the German IFO Expectations survey lower on Tuesday. Forecasts suggest a decline from 98.7 to 98.2 could take place which may be detrimental for the Euro exchange rate. US Housing Starts numbers will also be out, and economists suggest a slight upswing could take place. However, an increase could raise questions on how the Fed will handle monetary policy if the housing market looks to be heating up.
Wednesday – Will the Fed Hike Interest Rates?
The UK Consumer Price Index (CPI) will be out on Wednesday, offering some insight into inflation. Economists forecast a slight fall from 2.4% to 2.3%, which could be good for the Bank of England (BoE). The central bank has come under scrutiny recently for its uninspiring Brexit forecasts; economists will be watching the central bank’s comments moving forwards.
One of the biggest events of the day will be the Federal Reserve’s interest rate decision. There’s a divide in the market as to whether the central bank will increase rates once more this year, and there are also questions over long-term monetary policy in the US. A hike higher might prove positive for the USD/EUR and USD/GBP exchange rates, but dovish forward guidance may limit gains.
Thursday – UK Retail Sales in Focus
Australian employment numbers are out on Thursday which may offer the Aussie Dollar exchange rates some opportunity to move. UK Retail Sales will also be released; economists expect last month’s six-month low print of 2.2% for October will be pushed aside with a jump to 3.4% in November. The Bank of England (BoE) will announce its latest interest rate decision too, and although there’s no expectation for any movement, the Bank’s comments will be closely watched.
Friday – US Durable Goods Orders and UK Growth Numbers Ahead
Friday will see the release of the third quarter UK growth figure, which is expected to show annual growth from 1.2% to 1.5%. US Durable Goods Orders are also due for publication, and a 1.2% expansion is expected in November, following October’s disappointing -4.4% contraction.
The US Personal Consumption Expenditure numbers are due out which could cause some significant market movement for the US Dollar exchange rate.
Interbank Exchange Rates:
Towards the close of Friday’s European trading, the Pound to Australian Dollar (GBP/AUD) exchange rate was trending at 1.7506. The Pound to US Dollar (GBP/USD) exchange rate was trading at 1.2549. The Pound to Euro (GBP/EUR) exchange rate was trading at 1.1118.