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GBP, AUD, EUR, USD Exchange Rate Forecast

25 July 2017 by FC Exchange

The currency market could be in for an interesting week with a host of influential data due out that could impact GBP, EUR, USD, and AUD exchange rates, say industry specialists FC Exchange.

GBP forecast to react to further inflation developments.

Last week

Sterling fell 2.72% against the euro to a low of 1.1120.
Inflation data disappointed softening to 2.6% from the previous reading of 2.9%.
Retail sales rose by 0.6% on the month in June and 2.9% on an annual basis.
Public sector net borrowing worsened to 6.278B

Week ahead

With the pound firmly on the back foot after last week’s disappointing inflation data, eyes this week turn to two fundamental indicators out on Wednesday. First up will be gross domestic product (GDP) figures for Q2 which will be out at 9.30am. The markets are expecting growth of 0.2% for the quarter and any deviation to the downside will more than likely keep sterling under pressure and gains extremely limited. The inflation report hearings will follow this. With consumer prices playing a key factor as to when the Bank of England (BoE) may look at hiking interest rates, the markets will closely scrutinise the content. After the dip in inflation last week, any signs to suggest inflation will either stabilise or fall further, could cause the pound to react again to the downside.

ECB moves euro (EUR) on QE expectations

Last Week

Consumer price index (CPI) printed as expected at 1.3%.
German ZEW survey for economic sentiment and current situation declined.
German producer price index (PPI) out at 2.4% on the year, and 0% on the month.
European Central Bank (ECB) interest rate decision held at 0%.
Draghi commented that the ECB may start discussing reducing QE in the Autumn.
Consumer confidence for the block dipped to -1.7.

Week ahead

Last week’s comments by the ECB translated into strength for the euro, but in comparison, this week may be a little quieter with no major announcements expected by key figure heads.

The week starts off with a host of Markit purchasing managers’ indexes (PMI’s), which will reveal manufacturing, services, and composite data from Germany, France, and the Eurozone. This mid-tier data is expected to fluctuate slightly. Tuesday will see the German IFO business climate number for Germany released; a rise has been forecast. The next key data release is on Thursday with the German GFK consumer confidence survey. The week is capped off with a busy day for the single currency with a host of consumer confidence, business and climate change data out as well as GDP for Spain and key inflation data out from Germany.

USD could rally if Fed bumps up rates

Last week

Import price index rose to 1.5%.
MBA mortgage applications came in at 6.3%.
Building permit and housing starts both printed significantly better than expected at 1.254M and 1.215M respectively.
Initial jobless claims fell to 233K, but continuing jobless claims worsened at 1.977M
Philadelphia Federal Reserve manufacturing survey dipped to 19.5.

Week ahead

A 24-hour Organisation of the Petroleum Exporting Countries (OPEC) meeting is usually crucial to US dollar strength as news filters out regarding the outlook, which can impact the price of oil. Monday afternoon Markit’s manufacturing and services PMI surveys for July will be released. A reading above 50 should boost the USD for the evening as it’s the benchmark that separates expansion from contraction. The markets will then be awaiting the Fed’s interest rate decision and monetary policy statement on Wednesday at 19.00. Last week saw Federal Reserve Chief Janet Yellen comment that the economy had improved and no longer needs recession-era support. Markets are expecting one more interest rate hike in 2017. The likelihood is that it will be towards the end of the year; however, if there is a shock increase, the USD could rally.

Thursday will see initial, and continuing jobless claims data emerge, as well as trade balance ecostats. Friday markets will learn how much the economy grew in Q2. Economists are expecting a good number from the US and if it prints in line with forecasts, may help the dollar end the week on a high.

Aussie dollar (AUD) jumps with employment

The Australian dollar surged against a host of other currency majors after the Reserve Bank of Australia (RBA) minutes last week. Policymakers hinted that a rate hike might materialise sooner than many expected. The economy Down Under is experiencing a period of sustained growth with their employment figures up at around a four-year high.

Against the pound, the AUD is at a three-month high, and at present, the outlook is that rates will stabilise around the early 1.60’s.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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