GBP/USD forecast - page 27
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Will British Pound to Euro and US Dollar Exchange Rates Ignore Data Ahead of BoE Decision?
A cocktail of Brexit-related developments kept GBP/EUR and GBP/USD exchange rates on the decline ahead of the weekend.
Former member of the Bank of England (BoE) Monetary Policy Committee (MPC) Adam Posen weakened Pound Sterling exchange rates with his harsh comments on Brexit.
Posen explained to Bloomberg that;
Additionally the prospect of rising UK inflation caused investors to sell out of UK bonds, in what Rabobank analysts referred to as a ‘bloodbath’, pushing up the cost of borrowing for the UK government.
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GBP: Pause For A Breath Warranted; Where To Target?
On a trade weighted basis, sterling has fallen 8% since parliament returned on 5 September after its summer recess. The resumed fall reflected the clear rhetoric from Westminster that Brexit will proceed; Article 50 will be triggered before the end of March next year – and the UK will regain control over immigration. The UK’s position on immigration is at odds with the EU’s principle of free movement of people. Consequently, expectations of a hard Brexit rose and weighed heavily on sterling.
However, for the moment that expectation seems to be discounted and until new political dimensions emerge, sterling may consolidate. What shouldn’t be overlooked is that the economy is performing quite well for the time being. The housing market has perked up, the 3m/3m trend in retail sales shows upward momentum in consumption (September +1.8%), the labour market is holding up well, and inflation is showing signs of accelerating.
The rule of thumb is that every 10% drop in the exchange rate raises CPI inflation by around 1.75% over two years. Our expectation is that the BoE will probably upgrade its assessment of growth and inflation in the November inflation report. Meanwhile, the autumn statement on fiscal policy is likely to be expansionary and push out the timing of when a balanced budget will be achieved whilst also providing some current fiscal stimulus.
While it is impossible to quantify the appropriate risk premium for sterling and major questions overhang longer-run growth, in the short run sterling may have adjusted sufficiently.
ANZ targets GBP/USD at 1.22 and EUR/GBP at 0.88 by year-end.
source
Mark Carney Propels British Pound up v Euro, Dollar as Exchange Rate Market's Welcome News he will Stay Until 2019
A welcome boost for Pound Sterling ahead of the new month thanks to news the Bank of England's much-respected Governor will continue in his role through the UK's transition out of the European Union.
GBP rose after Bank of England Governor Mark Carney announced he would be staying in the job until June 2019.
There were concerns that he would leave the job earlier on personal considerations and/or on the back of pressure from some politicians who were not happy over a perceived pro-EU stance held by the Governor.
The reaction by the Pound confirms markets see his continued tenure as a positive for the UK economy.
In a statement, Carney said:
“I would be honoured to extend my time of service as Governor for an additional year to the end of June 2019. By taking my term in office beyond the expected period of the Article 50 process, this should help contribute to securing an orderly transition to the UK's new relationship with Europe.
"It is an honour and a privilege to serve in this important role. I deeply appreciate your support, that of the Prime Minister, and that of colleagues at the Bank, and I look forward to continuing to promote the good of the people of the United Kingdom during this crucial time for the country.”
Sterling was bid higher earlier after Prime Minister Theresa May said she was is in favour of Carney staying in the job for his full eight year term. There were concerns that May was frustrated with the direction Carney was taking the economy in, particularly with the damage quantitaitve easing was doing to savers.
“The prime minister has been clear in her support for the governor and the work that he is doing. Clearly it is a decision for him,” said May's spokesperson Helen Bower.
Bower said May “would be supportive” of Carney staying in the role longer than five years.
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GBPUSD seen falling to 1.1500 after Article 50 is triggered
Reuters out with the results of their latest poll 1 Nov
UK Nationwide house price index Oct mm 0.0% vs +0.2% exp
UK Nationwide October house price index report 2 Nov
Softer tones on prev reading as widely expected.