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Oil Slides, Pound GBP Medium-Term Conversion Rate Forecast vs EUR USD Amended Lower

July 28, 2015 - Written by John Cameron

UK GDP Supports Pound (GBP) Conversion Rate Against Euro



As expected by economists, the UK economy was shown to have expanded by 0.7% on the quarter in the second quarter and 2.6% on the year. Although the annual figure was lower than the 2.9% growth recorded in the first quarter, the strong quarterly number was enough to boost the Pound against the Euro and US Dollar.

Earlier...

BoE Interest Rate Comments Support the Pound Sterling (GBP) Exchange Rate Outlook



It all comes down to oil. The Pound Sterling (currency:GBP) has enjoyed strong gains in the global currency markets over the past ten days thanks to comments from Bank of England Governor Mark Carney suggesting that British Base Rate could begin moving higher ‘at the turn of the year.’

GBP to AUD Conversion Rate Close to Six Year Best, GBP/USD Exchange Rate Trends Higher



Carney’s forecast took investors who had been expecting at least another year of record low UK interest rates by surprise, so Sterling moved upwards against a raft of other major global tenders including the US Dollar (currency:USD), the euro (currency:EUR) and the Australian Dollar (currency:AUD). However, yesterday’s trading session saw the Pound endure heavy losses in spite of an absence of poor UK data or detrimental comments from domestic policy makers. Why was this?

Chinese Manufacturing Data Drives AUD, NZD, ZAR Exchange Rates Lower Today



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The answer can be found in the Far East where Chinese stock markets recorded mammoth intraday losses of almost 10.0% during Monday’s trading session. The sharp correction lower was driven by fundamental factors, with worryingly weak Chinese manufacturing and industrial profits data published either side of the weekend. The realisation from small time Chinese investors who make up 90% of the Far Eastern powerhouse’s share owners that their government’s efforts to prop up domestic share markets were futile added momentum to the move lower.

Foreign Exchange Short Term Predictions: GBP May Decline against EUR, USD



Concerns regarding the potential for an accelerated slowdown in the Chinese economy had a knock-on effect in global oil prices yesterday, sending the price of a barrel of Brent Crude down by almost 3.0% on the session. BoE Governor Mark Carney’s assertion that British interest rates could be heading Northwards within the next six months was predicated on a levelling off and slight uptick in global oil prices which would send UK inflation measures higher. Take that away and there is likely to be little scope to increase Base Rate any time soon.

Lee Hardman, an analyst at Bank of Tokyo-Mitsubishi UFJ, expanded on this point, stating yesterday that, ‘similarly to the Fed, those negative external risks, such as slowing growth in China and lower commodity prices, are pointing towards the risk of disinflation, which may prompt the Bank of England (BoE) also to consider more gradual and potentially delayed tightening.’


For these reasons, many experts have downwardly revised their medium term forecast for the Pound Sterling.
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