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Pound to US Dollar (GBP/USD) at Eight-Week High after UK Inflation Jump; GBP/EUR Climbs

September 18, 2018 3:36 pm | Modified September 19, 2018 8:42 am
Central Banks, GBP, TRY, USD, ZAR | BY Charlie Murray

The Pound to US Dollar (GBP/USD) and Pound to Euro (GBP/EUR) exchange rates managed to climb during Wednesday’s European session after the UK’s latest inflation print beat economists’ forecasts. The UK’s Core Consumer Price Index (CPI) came in at 2.1% on the year in August, climbing from 1.9%, while the non-core measure reached 2.7% from the former 2.5%. Sterling has reached an eight-week high against the US Dollar, trading above the 1.32 level as inflation hit it’s highest level in six months. The Bank of England (BoE) could now find itself under more pressure to raise interest rates.

Earlier: The Pound exchange rate put in a mixed performance on Tuesday, climbing against the US Dollar (GBP/USD), yet sliding against the Euro (GBP/EUR) and South African Rand (GBP/ZAR). However, Sterling still managed to climb by over 1.0% against the struggling Turkish Lira (GBP/TRY).

Pound Exchange Rate Forecast (GBP/EUR, GBP/USD, GBP/ZAR, GBP/TRY)

Investors in the Pound will be turning their attention to tomorrow’s highly influential events. The UK’s latest Consumer Price Index (CPI) will be out, with economists forecasting a decline from 2.5% to 2.4% on the year in August. Meanwhile, the core CPI measure is expected to drop from 1.9% to 1.8%. A fall could place less pressure on Bank of England (BoE) policymakers to increase interest rates in the near future. Additionally, in Wednesday’s session, BoE Chief Economist Andy Haldane is due to make a speech, which could influence Sterling, especially if he comments on the Bank’s monetary policy.

The US Dollar exchange rate could also be influenced by economic data on Wednesday, with the latest Housing Starts and Building Permits figures due to make their way onto the market. Friday will give insight into the services and manufacturing sectors when Markit releases it’s latest Purchasing Managers’ Indexes (PMI). One of the main things impacting the US Dollar at the minute is trade war threats between the US and China. US President Donald Trump announced Washington would be implementing tariffs on $200bn Chinese goods, which has been met with retaliation from China by way of tariffs against $60bn on US goods.

The Pound to US Dollar (GBP/USD) exchange rate is trading at levels of 1.3148.

This morning, European Central Bank (ECB) Chief Mario Draghi spoke in Paris. The central banker commented on European lending. Draghi believes lending in international markets has fallen since the 2008 Global Financial Crisis, suggesting that a more ‘growth friendly environment’ was needed in some countries in order to encourage lending from abroad.

Draghi continued:

‘Ultimately, what ensures a steady flow of bank lending to the economy, even in times of unforeseen stress or disruption, is a growth-friendly environment, which can only be assured by the appropriate government policies.’

The Pound to Euro (GBP/EUR) exchange rate is trending in the region of 1.1243.

Emerging Market Forecast: Turkish Lira and South African Rand Exchange Rates Suffer

Meanwhile, emerging market currencies such as the Rand and Turkish Lira were offered some support in recent sessions after Turkey’s central bank made the decision to hike interest rates, despite comments from Turkish President Recep Erdogan. The Turkish Lira has fallen by around 40% versus the US Dollar (TRY/USD) since the start of the year, but climbed by 2.0% on the news and gave other emerging markets a boost. However, Tuesday has seen the Turkish currency crash lower, reversing the 2.0% gains made against the Greenback. The move comes as investors take caution ahead of the government’s three-year plan announcement on Thursday. The Pound to Turkish Lira (GBP/TRY) exchange rate is trading at 8.3458.

Meanwhile, the South African Rand exchange rate may have an interesting time in the market on Wednesday when the latest inflation number is released. On Thursday the excitement will continue with the latest South African Reserve Bank (SARB) interest rate decision. At present, there’s a 52% expectation by money markets of an interest rate increase as rate hikes by other nations such as Russia and Turkey put more pressure on the SARB. However, many economists aren’t convinced a surprise hike will occur.

The Pound to South African Rand (GBP/ZAR) exchange rate is trending at 19.5222.

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