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Will GBP/EUR and GBP/USD Exchange Rates Fall on UK Trade Balance Turbulence?

Published: 5 Jan at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, India,

Pound Sterling (GBP)

The Pound has had a mixed week as 2018 begins.

GBP rose when the services PMI for December showed growth, but later fell on news that new car sales in 2017 had declined overall.

The November trade balance, out on 10th January, will be the main GBP-influencer this week. Estimates are for an expansion of the existing deficit, which could trigger a Pound decline.

Euro (EUR)

The Euro fell in value on 5th January, owing to trader discontent about a flash inflation estimate for December.

Estimates for the Eurozone-wide, annual figure were that inflation had slowed from 1.5% to 1.4%, something that reduces pressure on the European Central Bank (ECB) to consider interest rate hikes.

Hot on the tail of this data, 8th January will bring a range of Eurozone confidence measures.

The headline reading is a business confidence score for December; if this rises then the Euro could also appreciate.

US Dollar (USD)

US Dollar traders were largely disappointed on the afternoon of 5th January, when a spate of US ecostats missed with forecasts.

This weakened the US Dollar, leading to losses against the Pound and the Indian Rupee.

The US trade deficit expanded by more than forecast, there were less new jobs added than expected, manufacturing activity slowed and unemployment remained static at 4.1%.

The big news in the week ahead will be US inflation and retail sales stats; both are out on 12th January.

As it stands, the US Dollar may fall in value on the news as inflation and sales in December are tipped to slow.

Australian Dollar (AUD)

The Australian Dollar closed weekly trading in a bad way on 5th January, due to the October and November trade balances printing negatively.

The October figure, previously thought a surplus, was revised down into the deficit range. Making matters worse, the November reading showed a move further into deficit territory.

The Australian Dollar could be affected by a construction activity reading out this weekend, but the main upcoming news is 10th January’s business confidence score.

NAB bank is expected to report rising confidence in December, which could inspire an Australian Dollar recovery.

New Zealand Dollar (NZD)

There was little NZ news to refer to on the first week of January, but this didn’t prevent a New Zealand Dollar rise on Friday.

Given the limited NZ data to refer to, this advance was attributed to low US Dollar demand pushing up confidence in the NZD.

The only notable upcoming news will be building permit data on 11th January. Granted permits fell by -9.6% in October, so a recovery for the November reading could boost NZD demand.

Canadian Dollar (CAD)

The Canadian Dollar closed trading in high demand on 5th January, thanks to a surprise reduction in unemployment during December.

Although the November trade deficit expanded by more than expected, the Canadian Dollar remained in high demand because of the jobless rate drop from 5.9% to 5.7%.

There isn’t much high-impact Canadian news out next week, so the Canadian Dollar could be most strongly influenced by US news and US Dollar movement.
As of Friday, 5th January 2018, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1279, GBP USD exchange rate was 1.3567, GBP AUD exchange rate was 1.7259, GBP NZD exchange rate was 1.8926, GBP CAD exchange rate was 1.6841, and GBP INR exchange rate was 85.889.
Dominic Lee About Author: (443 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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