September Forecasts Favour US Dollar Strength Over Euro and Pound
- Written by: Gary Howes
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Indeed, it is the US dollar that is widely tipped to retain an upside bias while the British pound is expected to benefit from impending interest rises at the Bank of England.
Forex rates at the start of September:
- Pound to euro exchange rate (GBP/EUR): 0.14 pct higher than at last week's close at 1.2685.
- Euro to pound exchange rate (EUR/GBP): 0.13 pct lower at 0.7901.
- Pound to dollar exchange rate (GBP/USD): 0.17 pct higher at 1.6626.
- Pound to Canadian dollar rate (GBP/CAD): 0.04 pct higher at 1.8059.
PS: All the above are spot market quotes, your bank will affix a discretionary spread to the figures. In order to get as close to the market rate we suggest consulting an independent FX provider, the delivery of up to 5% more currency is possible in many instances.
Euro Facing Further Downside Momentum
The euro could be facing its eighth straight weekly decline against the US dollar.
One year lows lie ahead ahead with next week’s European Central Bank policy (ECB) meeting being widely tipped as being the one when the Bank introduces quantitative easing.
"Another problem for the euro zone yesterday was news on the Ukrainian crisis which appears to have moved up a level and could add more pressure on the euro zone economic recovery," says Nawaz Ali at Western Union.
British Pound Boosted by Consumer Confidence Data
Sterling has seen a decent relief rally and support put an end to the bout of weakness witnessed against the dollar.
Strong gains came against the euro and the outlook suggests further gains lie ahead for GBP/EUR.
Positive UK consumer confidence and house price data is supporting sterling at the start of the new month with the pound edging back towards a two-year high against the euro.
Nationwide Building Society reported that British house prices rose 0.8 percent (m/m) in August versus expectations of a small 0.1 percent gain.
"The pound has faced steep losses against the US dollar over the past two months amid softer house price and inflation data which supported the Bank of England's (BOE’s) calls to hold interest rates at a record low 0.5 percent until 2015," notes Ali.
The CBI's survey covering British retail sale activity in August also beat market expectations which is helping the pound hold above five-month lows against the US dollar.
Another Strong Month for the US Dollar?
As mentioned it is the USD that is the one to watch.
"The US dollar has strengthened substantially this month against both the euro and British pound but appears to be losing a little steam ahead of month-end," says Ali.
US GDP data released on Thursday showed the US economy rebounded more strongly than initially thought in the second quarter but this had a marginal impact on the US dollar.
Revisions showed the US economy expanded at a 4.2 percent annual rate instead of the previously reported 4.0 percent pace.
Commenting further, Ali says:
"It was the fastest pace since the third quarter of 2013. Key now for the greenback could be euro zone inflation data today which is currently the most significant piece of data the ECB is focusing on.
"Against consensus expectations, if the data does not increase deflations fears for the euro area and weigh on the euro, currency investors may decide to take profit on the sharp fall in EUR/USD this month.
"Against the euro the US dollar has risen by around three cents this month and about six cents since July."
