The Pound exchange rate has broken above the 1.14 level versus the Euro (GBP/EUR), while the Pound Sterling to US Dollar (GBP/USD) currency pair trades above 1.30 in today’s session.
The GBP/EUR and GBP/USD exchange rates began to edge lower in Friday afternoon’s session. The US Change in Non-Farm Payrolls stat came in at 250K in October, a far sight higher than the 200K forecast. However, the previous month’s figure was negatively revised lower, to 118K.
GBP/USD Gains Three Cents while GBP/EUR Hits Two-Week High
Although GBP/EUR has since fallen, breaking through the 1.14 key psychological barrier has been an interesting development in today’s trading. Positive Brexit news is keeping the Pound buoyant, allowing the GBP/USD exchange rate to trade three cents higher than it had earlier in the week. The GBP/EUR exchange rate has hit two-week highs.
Reports that the UK and Brussels had secured a financial services deal excited the City and saw investors keen to buy the Pound. Bank of England (BoE) Governor Mark Carney also got in on the action, saying that a no-deal Brexit might result in an interest rate hike–a statement that raised some eyebrows.
Economist James Smith commented on the event, saying:
‘In a “no deal” scenario, the Bank has suggested rates could go in either direction. However, given the wide-scale disruption that would likely occur, we suspect policymakers would “look through” any spike in prices caused by a weaker pound, and cut interest rates or increase quantitative easing fairly swiftly.’
Meanwhile, the Eurozone has problems of its own with the Italian budget issue and potential political instability in Germany. However, today, European Commission President Jean-Claude Juncker said there was no danger of Italy departing from the EU. In the midst of this, the Italian Manfacturing Purchasing Managers’ Index (PMI) was revealed to have declined in October against a backdrop of broader declines.
Economist Claus Vistesen comented:
‘The alarming decline in in the Italian index is the stand-out detail to the downside, raising further downside risks for the economy amid an already stalling economy in Q3. An outright GDP contraction is now well within the realms of possibility in coming quarters.’
Given the amount of uncertainty and feeble Italian growth, there’s the possibility the country may enter its third recession in a decade. which could bode very badly for the Euro exchange rate.
US Dollar Exchange Rate Awaits US Non-Farm Payrolls Data
Across the pond, heads are turned towards the US Non-Farm Payrolls reading due out later today. Last month’s reading undershot forecasts significantly, but given this week’s ADP Employment Change reading–which exceeded expectations–hopes are high for a bold number.
The Pound to US Dollar (GBP/USD) exchange rate is trending in the region of 1.3017. The Pound to Euro (GBP/EUR) exchange rate is trading at 1,1371.