The British pound (GBP) is seen to be maintaining that advantage against the euro which has been in place for much of 2014 - the question being asked now is whether a new inter-year high will be breached.
September 25,2014
The new week has seen the British pound advance in confident fashion against both the euro and US dollar. Indeed, we are seeing signs that the pound dollar rate could have bottomed out.
September 22,2014
The British Pound (GBP) outperformed in overnight trade, rising to a 2 year high against the Euro, and ran higher as soon as polls closed with a strong day on the foreign exchange market. The US Dollar meanwhile retained its overall strength.
April 9,2021
Pound Sterling conversion rates gained slightly on final polls ahead of the Scottish vote showing the No camp is slightly ahead. However nervousness surrounds the referendum result and its impact on foreign exchange could be huge.
September 22,2014
Forecast for Friday: if Scotland votes Yes a potential crisis for foreign exchange could emerge, with Pound Sterling conversion rates at its heart. However, ahead of the vote is the FOMC meeting, which if it has a more cautious outlook could trigger a rally in sterling, as the UK – US yield spread widens.
Exchange Rates at Time of Last Update:
The pound to US dollar exchange rate: 1 GBP converts into 1.6320 USD.
The euro to US dollar exchange rate: 1 EUR converts into 1.2836 USD.
The euro to pound exchange rate: 1 EUR converts into 0.7864 GBP.
International Payments? Don't Get Burnt by the Markets or Your Bank - Ask your FX provider if they have the relevant stop loss order to protect against downside losses and a buy order to take advantage of your best-case rate when reached. In addition, using an independent provider instead of your bank can deliver up to 5% more FX.
Positive jobs and wage data and minutes from the BOE’s September meeting that showed two policymakers voted in favour of raising rates helped lift the pound overnight.
Overnight, data showed the number of Britons claiming unemployment benefits fell by 37,200 in August, which was better than expected and that average earnings rose by a very healthy 0.6%(y/y) in July.
Looking at the Scottish referendum a yes vote could trigger a decline for the GBP/US Dollar, while a win for the no camp could see it get back to 1.6600.
Due to the uncertainty for an independent Scotland, the larger market reaction will be around a yes vote, while a no vote could see an initial move higher in the pound before it starts to fade.
The extent of upside for the Pound Sterling/US Dollar on Friday could depend on the margin of victory for a no vote. If no wins by only a narrow margin, GBP/US Dollar upside could be restricted.
A no vote would likely shift the market focus back to fundamentals, which should see the pound recoup much of its recent losses.
The British pound firmed off of its 10 month low against the dollar after the latest poll on Scottish independence showed the No camp slightly in the lead.
Questions exist about the future of the currency, taxes, oil revenues, trade and British military bases in Scotland.
Importantly, it also raises questions about how the UK’s national debt will be divided up, which would likely see Britain’s debt-to-GDP ratio rise if it is a Yes victory.
The Euro was little moved overnight ahead of the FOMC monetary policy statement and press conference by Janet Yellen.
Investors overlooked an upward revision to Euro zone CPI in August from 0.3%(m/m) to 0.4%(m/m) as it likely does little to change the outlook for additional monetary support from the ECB.
While no change to today’s FOMC could send the dollar lower in the near-term, any gains in the Euro will likely continue to be viewed as selling opportunities.
Consequently, the single currency’s upside will continue to be limited.
The US dollar stuck to narrow ranges overnight as investors braced for the FOMC monetary policy statement and the following press conference by Fed Chair Janet Yellen.
The Fed is expected to cut its monthly bond purchase by another $10 billion to $15 billion per month but make no changes to its key lending rate.
The Fed will also release its most recent forecasts for inflation, growth and borrowing costs this afternoon.
Much debate has focused on the Fed’s forward guidance, specifically on the language used to describe the period between the end of QE and the timing of its first rate hike.
WSJ yesterday reported Fed language and the first rate hike would not change sending yields lower and lessening the dollar’s appeal somewhat.
But any change in language and sooner rate rise will send both Treasury yields and the dollar broadly higher.
A hawkish Yellen could trigger a rebound in the dollar, which could weigh on GBP/US Dollar possibly sending it back to its low from September.
Better Together? Pound Sterling, Euro and US Dollar conversion rates all depend on the week ahead. Speculation is set to rule foreign exchange markets and forecasts until the outcomes of this week’s series of key events are known.
Exchange rates:
The pound to US dollar exchange rate: 1 GBP converts into 1.6215 USD.
The euro to US dollar exchange rate: 1 EUR converts into 1.2939 USD
The euro to pound exchange rate: 1 EUR converts into 0.7979 GBP.
International Payments? Don't Get Burnt by the Markets or Your Bank - Ask your FX provider if they have the relevant stop loss order to protect against downside losses and a buy order to take advantage of your best-case rate when reached. In addition, using an independent provider instead of your bank can deliver up to 5% more FX.
GBP against the US Dollar fell to its lowest level since November of last year this past week.
Substantial volume rise over the past few weeks has bolstered decline along with new yearly highs in OBV supporting the downtrend.
A daily close over 1.6305 on above average volume is needed to shift near-term bias higher.
Pressure to increase the ‘No’ vote in the Scottish referendum is dominating Westminster discussions.
Polls show the result is too close to call and many undecided voters are being targeted by both the ‘Yes’ and ‘No’ parties.
Impacts of either result look set to upset the Pound Sterling with a loss of confidence and stability in the United Kingdom evident.
Of course a ‘No’ result will bolster confidence in the short-term, however devolution of powers has been promised and it is still unknown how this will affect the connected economies across the UK.
The effect of a ‘Yes’ result will no doubt be negative for the Pound’s strength, until it is better understood how independence will work.
Unfortunately speculation from polls and the news outlets will dominate until Thursday's result is known.
The Euro against the US Dollar traded at its lowest level since July of last year last week.
Its daily volume has been in a steady rise since July which bolsters the medium-term downtrend.
However, OBV is seeing a minor divergence on the daily and is a potential reversal signal.
A dramatic increase in volume to move through 1.3010 is needed to confirm that a more serious counter-trend move is underway.
Since ECB action the Euro as it has dropped almost 14% from its March highs. But sentiment on the Euro is bearish, so a rebound maybe likely before it moves lower.
The marked pick up in private sector consumption announced Friday in the August Retail Sales report may encourage the Federal Open Market Committee (FOMC) to normalise monetary policy sooner.
We may also see a growing number of central bank officials adopt a more hawkish tone for monetary policy as the board looks to conclude its asset-purchase programme on 29th October.
The expansion in private sector credit along with wage growth has prompted strong consumption in August, and a better-than-expected print may put increased downside pressure on the Euro against the US Dollar as it raises the outlook for growth and inflation.
However, sticky inflation paired with the slowdown in job growth may drag on household spending, and may prompt a larger correction in the dollar as it limits the Fed’s scope to move away from the zero-interest rate policy ahead of schedule.
At the end of last week foreign exchange markets closed with Pound Sterling under pressure from the Scottish referendum, while the Euro closed slightly up against the US dollar and the Pound. Forecasts for this week’s activity cite the potential for more market activity for conversion rates across the board.
Exchange rates:
The pound to US dollar exchange rate: 1 GBP converts into 1.6233 USD.
The euro to US dollar exchange rate: 1 EUR converts into 1.2945 USD
The euro to pound exchange rate: 1 EUR converts into 0.7973 GBP.
International Payments? Don't Get Burnt by the Markets or Your Bank - Ask your FX provider if they have the relevant stop loss order to protect against downside losses and a buy order to take advantage of your best-case rate when reached. In addition, using an independent provider instead of your bank can deliver up to 5% more FX.
Pound Sterling ended the week up as the polls showed Scots favouring staying in the UK. But Sterling remains vulnerable to continued volatility - it also hit a month low of 1.6071 against the US dollar during the week.
More financial and retail businesses continue to speculate on the possible repercussions of Scotland leaving the UK: from price hikes to major relocations.
Even after the referendum, there is a lengthy time frame for important negotiations regardless of a ‘Yes’ or ‘No’ result as Westminster promises more powers to Scotland if there’s a ‘No’ victory.
So a high degree of uncertainty is likely to occur and high risk UK premiums are likely over a period.
The euro has held above its recent 14-month low against the dollar, closing slightly up over the week.
The single currency remains vulnerable in the near-term, given its recent lows. Look out next week for the results of the ECB’s first auction on its new targeted long-term refinancing operations (TLTROs).
The auctions are intended to inject liquidity into banks for lending to the private sector (excluding house purchases), therefore potentially lifting inflation and real activity. The German ZEW index is expected to take a further small drop for September, probably on the back of ECB support and a weaker Euro.
August Retail Sales report released Friday shows that the US economy continues to grow strongly, better than anticipated at 0.3% versus 0.2% expected.
Investors continued to favour the US dollar as it remained within sight of a 14-month high this week. This strong economic data provides increasing optimism for America’s recovery, with borrowing costs potentially rising sooner than expected.
Two things to look out for from the Fed next week will be whether it changes its forward guidance on how close it is to its long-term goals and whether the projections for the first hike will be moved forward.
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