Exchange Rates: UK Pound Lower Again, Dollar to Strengthen, Euro at 8 Month Lows

Meanwhile, the US dollar retains its mid-year strength while the euro suffers as the Eurozone just can't seem to find the ability to grow which will continue to udnermine the exchange rate.

At the time of writing (22/08), for your reference, the following currency levels are seen:

• The pound to euro exchange rate (GBP/EUR) is 0.03 pct higher on a day-to-day basis having achieved 1.2490.
• The pound to dollar exchange rate (GBP/USD) is 0.05 pct higher at 1.6589 - remaining at four month lows.
• The euro to dollar rate (EUR/USD) is 0.01 pct in the blue having reached 1.3282 - the pair remains around a fresh 8 month low.

If you are holding out for better exchange rates then don't hesistate, ensure your FX provider has the relevant buy order in place for when your rate is achieved. Likewise, if there is a threshold you are not willing to cross to the downside ensure stop-loss orders are in place. Please find out more.

The British Pound Today: GBP Volatile as Retail Figures Sink

Sterling notched a new early April low against USD as weaker than expected U.K. consumer spending offered more evidence of how the British economy has come off a boil. Retail sales rose by a mere 0.1 percent (m/m) in July, just a quarter of forecasts of a 0.4 percent (m/m) gain.

Meanwhile, the 2.6 percent rise in the annual number was the slowest since November.

"Sterling has rapidly fallen out of favor this summer as more and more hop off the early rate hike bandwagon," says Joe Manimbo at Western Union.

Minutes from the Bank of England’s August meeting showed that not one but two of the nine officials voted to boost borrowing rates to 0.75 percent from an all-time low of 0.50 percent, reasoning an improving economy and a rapidly falling jobless rate.

The pound shot higher as a result. However, gains have ultimately been pared back as markets adopt a coy stance towards the Bank.

"But given sterling’s swift fall of about six cents and 3.5 percent in a little more than a month, it may not be far from forming a bottom, words of caution to GBP buyers. The pound’s better tone was also supported by CBI factory orders which rose to 11 in August; nearly three times better than expected," says Joe Manimbo at Western Union.

Inflation figures knock GBP

The UK's sterling was one of the biggest losers in global FX early in the week following news that UK inflation for July had fallen further than expected.

U.K. Consumer prices rose at an annual pace of 1.6% last month and month-on-month they fell 0.3% from 1.9% in June.

"With inflation comfortably below the Bank of England’s 2% target and wages growing at their slowest annual pace on record, the monetary policy committee are likely to hold off raising rates this year. That certainly seemed to be the message from their quarterly inflation report last week which highlighted the weakness of wage growth as a factor that would determine the timing and pace of rate increases," says Andy Scott at HiFX.

All eyes will be on the release of the Bank of England's August meeting minutes - look to see if members of the Bank's MPC committee voted unanimously to keep rates unchanged. Had they not, then this could push GBP higher.

GBP Could Still Gain vs Euro

However, before writing the sterling euro rate off, consider that the Eurozone is still looking poor.

It is for that reason that HiFX are mainting a higher GBP/EUR forecast for the remainder of the year.

Scott says:

"But with the economy still growing at a pace even faster than the U.S. there is some scope for it to bounce back, particularly against the euro where the ECB are facing pressure to weaken monetary policy further rather than tighten it. We continue to expect the GBP/EUR rate to move towards 1.30 this year but would expect it to struggle against the U.S. dollar where the policy dynamics are becoming more aligned.”

Euro Rate Today: 8 Month Lows vs the Dollar

The euro rate is once again struggling to find traction after a key pillar for the bloc, its current account surplus, shrank in stature in the latest period.

Joe Manimbo, Senior Market Analyst at Western Union tells us we should be wary of an bouts of strength which could well materialise:

"The bloc’s current account narrowed more than expected to €13.1 billion in June from an upwardly revised €19.8 billion in May.

"The euro owes some of its resilience to the bloc’s healthy current account position but the smaller surplus underlines broad based economic weakness in the region.

"A word of caution to euro buyers because as poor as sentiment remains toward the euro, it could quickly find itself on the receiving end of a short-covering rally given that bets against the euro have become the most stretched in years.

"Potential triggers for a euro bounce are seen in Friday speeches from Fed Chair Yellen and European Central Bank (ECB) President Draghi who are both slated to speak at the Fed’s Jackson Hole summit of central bankers."

Dollar Rate Today: Strong Housing Stats Boost USD

The dollar continues to benefit from improving economic data releases.

Today it was the turn of the housing sector to prompt dollar buying - both housing starts and building permits scored solid gains.

Housing starts soared 15.7 percent in July to 1.09 million annual units.

Permits, a gauge of future activity, jumped 8.1 percent to 1.05 million units.

Manimbo says:

"As expected, core consumer prices rose 1.9 percent annually in June, near the Fed’s 2 percent target. Though stronger today, the buck faces a tall hurdle Friday when Fed Chair Yellen delivers the keynote talk at the bank’s annual conference in Jackson Hole, WY.

"The topic is the U.S. job market which as gained remarkable strength but still isn’t firing on all cylinders. Any remarks that stop short of bringing forward rate hike expectations could weigh on the dollar."