Outlook for the pound against the euro and the dollar ahead of the weekend
British Pound Exchange Rate Outlook
The pound-to-dollar exchange rate (GBP / USD) rose sharply following the BoE’s decision to keep interest rates unchanged. Back above 1.37, Cable took advantage of a much stronger sense of risk to support its rally. Nevertheless, despite keeping interest rates at the same level as expected, the attached statement indicated concerns about UK inflation reaching 4% by the end of the year. Such a belief among MPC members will keep them on the hawkish side of things, although concerns about slowing growth appear to be growing. The declines in composite PMI and services readings last month confirmed this fact.
Euro (EUR) exchange rate today
Much like the UK data, German and Eurozone PMIs missed out on fairly wide margins across the board. When we say it at all levels, we really mean it because every PMI in Germany and the Eurozone has failed. Unsurprisingly, this likely weighed on the EUR, capping its gains somewhat although EUR / USD was still able to hit 1.1740. Once again, it is the dollar index and risk appetite that are driving the currency, although the blatant weakening of growth conditions looks like they could hit the Eurozone harder and this poses more risk across the board.
US Dollar (USD) Exchange Rate Outlook
Unemployment claims were higher than expected at 351,000, while PMIs also fell short in the United States. Data like this is further evidence that the Federal Reserve won’t move too quickly with its plans to cut, unemployment claims in particular, helping to point out that there could be some slack in the labor market for a while. time. Wall Street bounced back aggressively with gains of over 1% in most major indexes.
Scotiabank analysts provided the following analysis of the short-term technical situation of the euro, expecting further pressure,
“The euro reversed most of its decline yesterday afternoon / evening with the 1.1685 / 90 area preventing a test of the August lows of 1.1664 / 5 following the loss of support at 1, 17. The rebound from levels below 1.17 suggests the euro will maintain its two-month range (capped at 1.19), but general trends point to continued currency weakness towards a test of 1.16 initially. “
USD / JPY rose 0.1% overnight as CPI data once again showed a flat reading, and simply underlines that the BoJ will fight deflation for the foreseeable future. Trading at 110.43, grip 111 and beyond is back in the range. AUD / USD rallied above 0.7300 as concerns about the spread of the Evergrande contagion appear to subside. Bitcoin rose 1% to return to $ 45,000
The day to come
It will be a rather strange Friday, without a lot of data but with a lot of risky events. Jerome Powell, the Fed chairman, is expected to speak, as is Lane of the ECB (who has often been a bit more hawkish than his partners in Europe). US new home sales and German IFO data are all top-level statistics for the day.