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Pound Sterling Exchange Rate Forecast: Are GBP Gains ahead on UK Wage Squeeze Reduction?

Published: 16 Mar at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada,

Pound Sterling (GBP)

The Pound has closed weekly trading on 16th March in a mixed position, having traded tightly against the Euro and US Dollar.

This varied performance is down to gloomy UK economic forecasts being countered by low risk sentiment making the Pound a more attractive currency.

Looking ahead, Sterling could make all-around gains next week on 20th and 21st March if UK inflation slows and wage growth rises.

These outcomes would reduce the intensity of the current UK wage squeeze, improving conditions for consumers and raising the likelihood of greater consumer spending.

Euro (EUR)

The Euro has closed weekly trading in a poor position, having made minor losses against both the Pound and US Dollar.

The current lack of confidence in the Euro is down to reports that inflation slowed in February, meaning a move away from the European Central Bank’s (ECB) 2% target.

This has led Euro traders to conclude that the ECB may hold off on any immediate monetary policy adjustments, which has lowered demand for the single currency.

The Euro may recover if construction output rises on Monday, although gains could be short-lived as most of the week’s other Eurozone data is been forecast to print negatively.

US Dollar (USD)

Although it suffered a period of losses earlier on 16th March, the US Dollar has since recovered and is set to close weekly trading positively against the Pound and Euro.

Consumer sentiment levels in March have risen instead of falling as expected, although there is still background uncertainty about tariffs that will be activated on 23rd March.

The USD could firm against its peers on 21st March, if the Federal Reserve raises US interest rates as expected. Economists have been pricing in a 25 basis point rise, from 1.5% to 1.75%.

Australian Dollar (AUD)

Due to plunging levels of risk sentiment, the Australian Dollar has fallen against all peers bar the New Zealand Dollar on 16th March.

Additional negativity has been caused by Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle, who has warned about global economic complacency.

The RBA’s minutes for its March interest rate meeting will come out on 20th March; if they show positive predictions for the AU economy in the future then the Australian Dollar could appreciate.

New Zealand Dollar (NZD)

The New Zealand Dollar has been a poor performer near close of trading on 16th March, due to sharply reduced levels of risk sentiment among currency traders.

NZ business confidence readings have done little to reverse this plunge in NZD trader confidence, as the figure for February has dropped from 54.4 points to 53.4.

The New Zealand Dollar may restore itself on 20th March when the Global Dairy Trade price index comes out – if this shows a boom in global dairy prices then the NZD could appreciate.

Canadian Dollar (CAD)

Like other currencies considered ‘risky’, the Canadian Dollar has closed weekly trading in low demand.

Although Canada is seemingly exempt from US metal tariffs, even this hasn’t dispelled the fear that future trading could be adversely affected.

The coming week’s inflation and retail sales stats on Friday might trigger further CAD losses.

Retail sales in January are predicted to show slightly positive results, but if inflation slows then a near-term Bank of Canada interest rate hike may be off the cards.
As of Friday, 16th March 2018, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1343, GBP USD exchange rate was 1.3947, GBP AUD exchange rate was 1.8075, GBP NZD exchange rate was 1.9325, and GBP CAD exchange rate was 1.8273.
Dominic Lee About Author: (474 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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