The Pound to Euro (GBP/EUR) and Sterling to US Dollar (GBP/USD) exchange rates are trading slightly higher on Tuesday as markets digest economic data and central bank developments.
Pound Reacts to BoE’s Broadbent Comments on Interest Rate Hikes
Dovish comments by Bank of England (BoE) Deputy Governor Ben Broadbent did little to help the Pound yesterday. Broadbent was the last BoE speaker ahead of the August monetary policy meeting. The central banker suggested that the BoE’s quantitative easing programme could cool inflation which may in turn result in a delayed interest rate hike.
Data out from the Eurozone today has shown a slowdown in growth. The Eurozone Services Purchasing Managers’ Index (PMI) came in at 54.4 in July, a slip from the previous 55.2 reading. However, the Composite PMI took a tumble too, falling from 54.9 to 54.3. The composite measure has declined on account of trade war fears.
Markit’s Chief Business Economist Chris Williamson said:
‘Given the warning growth of new business and further slide in business optimism, the outlook has also deteriorated, notably in manufacturing where the surveys saw worries about trade wars intensify markedly in July.’
Today’s session has also seen the latest Confederation of British Industry (CBI) stats out. The CBI’s Business Optimism came in at -3 in Q3, an improvement on the previous -4 reading. Meanwhile, the CBI’s Industrial Trends Orders printed at 11 in July after June’s 13.
Tom Crotty, Chair of the CBI Manufacturing Council commented:
‘It’s great to see the manufacturing sector firing on all cylinders, with production revving up again after the slowdown earlier this year. But rising trade tensions and ongoing uncertainty over our future trade and customs arrangements are clearly taking their toll on manufacturers’ confidence and investment.’
Wednesday will see the release of the German IFO Current Assessment, Expectations, and Business Climate numbers which could influence the Euro exchange rate moderately. Meanwhile, Thursday will be a day to watch with the European Central Bank (ECB) making it’s latest monetary policy decisions with a follow-up press conference with head central banker Mario Draghi.
US Dollar Rises in Anticipation of Stronger GDP Growth Figures
Meanwhile, the US Dollar managed to claim some ground in yesterday’s Stateside session when rumours hit the market that second quarter Gross Domestic Product (GDP) readings would be better-than-forecast. US President Donald Trump indicated that the figure would be much stronger than expectations suggest (of between 4.0%-4.3%) and markets took the rumours as a likely sign of things to come given Trump’s previous tendencies to leak economic news.
Also in market news, anxiety over potential trade wars are running rife after the Group of 20 (G20) stated:
‘Global economic growth remains robust and unemployment is at a decade low. However, growth has been less synchronised recently, and downside risks over the shirt and medium term have increased. These include rising financial vulnerabilities, heightened trade and geopolitical tensions, global imbalances, inequality and structurally weak growth, particularly in some advanced economies. We… recognise the need to step up dialogue and actions to mitigate risks and enhance confidence.’
However, it’s thought unlikely that Trump will heed the warning and ease the anxiety of markets, and so currencies will probably remain sensitive to any developments.
The Pound to US Dollar (GBP/USD) exchange rate is trading at 1.3110. The Pound to Euro (GBP/EUR) exchange rate is trending in the region of 1.1216.