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Pound Exchange Rate Forecasts: Sterling Advance Possible on Consumer Confidence Improvement

Published: 26 Jan at 1 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Mexico,

Pound Sterling (GBP)

The Pound has made a moderate 0.3% advance against the Euro today, in addition to surging by 0.8% against the US Dollar.

This favourable performance comes after reports that UK quarter-on-quarter GDP grew in Q4 2017, while year-on-year growth slowed by less than expected.

While this data has supported the Pound today, Darren Morgan from the Office for National Statistics has cautioned that;

‘Despite a slight uptick in the latest quarter, the underlying picture is of slower and uneven growth across the economy’.

The Pound could next be affected by the GfK consumer confidence reading on 31st January, which previously showed a negative -13 point reading.

If this rises unexpectedly, demand for the Pound could increase.

Euro (EUR)

Although it has advanced by 0.4% against the US Dollar today, the Euro has also slipped by -0.3% against the Pound.

This mixed performance comes after European Central Bank (ECB) President Mario Draghi gave a speech about the future of the Eurozone, which was broadly optimistic.

While Mr Draghi refrained from making explicit forward guidance, the fact that he didn’t backtrack on previous optimistic statements was seized on by Euro traders.

The Euro could turn volatile on 30th January, when Eurozone confidence and GDP data will be released.

Current estimates for January’s confidence readings are mixed, but if the Q4 GDP growth estimates rise then the Euro could rally against the Pound and US Dollar.

US Dollar (USD)

The US Dollar has been in low demand today, with the latest developments at the World Economic Forum (WEF) in Davos lowering confidence in the USD.

US Treasury Secretary Steven Mnuchin and President Donald Trump have offered contrasting views on the Dollar, respectively respecting weakness and desiring strength.

The main drag, however, has been tension ahead of Trump’s headline speech at Davos.

There are concerns that the President could brag about the US economy and his ambitions to minimise the US trade deficit, which goes against the WEF spirit of mutually cooperative trade.

If Trump’s comments end up alarming USD traders today, the Dollar could plummet in value against its peers.

Australian Dollar (AUD)

As Australia Day celebrations get underway, the Australian Dollar has advanced against the Euro and US Dollar but dipped against the stronger Pound.

This overall positivity is mainly down to the US Dollar’s present weakness, which could be reversed in the near-term.

The next significant data from Australia will be out on 30th January, when NAB bank puts out its business confidence reading for December.

On the month, expectations are for slight growth in the business sentiment score, which could raise demand for the Australian Dollar.

New Zealand Dollar (NZD)

As with the Australian Dollar, the New Zealand Dollar has risen against the US Dollar and Euro today, mainly because of USD weakness.

The last NZ data to speak of came on 24th January, when it was reported that Q4 inflation in New Zealand had slowed on the quarter and the year.

If the US Dollar picks up in the near-term, the New Zealand Dollar could fall back in value.

Further ahead, an NZD rally is possible if trade balance data out on 29th January shows a major deficit reduction.

Canadian Dollar (CAD)

The Canadian Dollar has dipped against the Pound, traded tightly against the Euro and made a 0.5% advance against the US Dollar today.

This mixed movement comes after Donald Trump’s alarming statement that he could terminate the North American Free Trade Agreement (NAFTA).

Canada and the US are members of the NAFTA deal, along with Mexico. Trump has long considered simply removing the US from what he calls a ‘horrible deal’.

While this is estimated to cause major damage to the Canadian economy, it is also not seen as the best outcome for the US either.

Trump’s imminent speech could bring an elaboration on his future ambitions for US-Canada trade – if they are especially one-sided then the Canadian Dollar could be devalued further.
As of Friday, 26th January 2018, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1393, GBP USD exchange rate was 1.4161, GBP AUD exchange rate was 1.7462, GBP NZD exchange rate was 1.9266, GBP CAD exchange rate was 1.7442, and GBP MXN exchange rate was 26.1692.
Patrick James About Author: (289 Posts)Patrick completed his economics degree just as the global financial crisis struck in 2008. In the intervening years Patrick has made his mark, climbing to a prominent position within a large financial services provider. As part of his role Patrick uses his expertise to advise companies of the best ways to safeguard against currency risk.

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