Outlook for the British Pound Against the Euro and the Dollar
US dollar exchange rate outlook
The pound / dollar (GBP / USD) exchange rate struggled on Thursday as risk averse sentiment weighed on cable. With no UK data to focus on, it was the dollar spectacle that drove the pound lower. Britain’s coronavirus cases continue to show signs of cooling, but the problem of seasonality could arise with more infections as winter approaches.
Ultimately, the interest rate outlook will be the most important factor in whether or not the British Pound breaks out of its channel around 1.38. Scotiabank economists published the following forecast in their recent FX daily, noting that while bullish, they don’t expect much rise in Cable, saying:
“Overall, the BoE should continue to signal that rate hikes are coming next year while the Fed remains unchanged until 2023 and this should act as a short-term tailwind for the GBP. Sustained surge above 1.40 seems unlikely, however, as Fed officials are finally starting to talk about hikes with the possibility of an increase in late 2022. “
Euro (EUR) exchange rates are under pressure
The Euro was pressured by the stronger USD, falling to 1.1770 as EUR / USD fell. With no economic data to focus on, stock market swings weighed on the euro despite a rather optimistic speech from President Lagarde. The ECB boss referred to the fact that the economic recovery happened faster than expected, perhaps to justify the recent slowdown, but certainly said nothing to move the bulls in the hope of a hawkish turn.
US Dollar (USD) Exchange Rate Outlook
It was the US data that made the headlines Thursday. Initial jobless claims were worse than expected at 332,000, underscoring ongoing difficulties in getting people back to work. September continues to be a tough month for stocks with Wall Street edging down, despite comfortably outperforming retail sales and better-than-expected Philadelphia manufacturing. As the US consumer outshines sagging sentiment, bulls may hold on to lasting economic momentum that will maintain hope for a decline, as hawkish seasonality as the year-end approaches has often been overwhelming. beneficial for the USD.
There was quite a bit of movement overnight as the Australian dollar climbed 0.15% and the USD / JPY advanced 0.12% as the yen weakened in a generally risky session. positive. The Chinese yuan was particularly weak on Thursday, pushing the USD / CNH up to 6.4525 as the leadership crackdown continues. In cryptocurrency markets, Bitcoin was trading mostly sideways, hovering around $ 47,000.
The day to come
Today three major economic data releases, starting with the UK where retail sales are likely to impact the pound sterling. After that, it will be the Eurozone CPI (inflation data), followed by US consumer sentiment in Michigan that will close the week.