Pound Sterling (GBP) Forecast Hit by Carney Comments and Osborne Giving Up

June 30, 2016 - Written by Minesh Chaudhari

STORY LINK Pound Sterling (GBP) Forecast Hit by Carney Comments and Osborne Giving Up

The Pound has been a poor prospect overall today, owing to yesterday's BoE induced caution combining with recent dovishness on the part of Chancellor George Osborne.

Sterling has flopped today, due to Bank of England (BoE) Governor Mark Carney raising the odds of an interest rate cut in the near-term.

Pre-Brexit Growth Data Improved, GBP Exchange Rates Climb

While political concerns in the UK have occupied the minds of global investors, currency market participants have switched their focus to a raft of tier one economic statistics during today’s session.

One relatively positive piece of news for the Pound Sterling (currency : GBP) was confirmation earlier this morning that the UK economy expanded by an annualised 2.0% during the three months to the end of March. This much had been anticipated by analysts; what is not yet known is the effect which the long, drawn out referendum campaign has had on British economic activity during Q2.

Investors will not have to wait for long to find out, with provisional Quarter 2 GDP numbers due for publication next month. A big dip in domestic economic activity is forecast to send the Pound sharply Southwards against the other sixteen most actively traded global currencies.

The latest UK Current Account data, also covering Q1, published during the European morning session, proved to be considerably less encouraging.

The official numbers from the UK’s Office of National Statistics (ONS) revealed that the surplus of foreign imports into the UK versus British exports to foreign markets stood at a massive £32.6bn. Although this was marginally behind the upwardly revised £33.96bn of Q4 2015, it still served to provide firm evidence that the UK economy remains heavily unbalanced.

Positive German Labour Market Data Weighed on GBP EUR Exchange Rate

Elsewhere, there was also a timely reminder that the euroland’s number one economy remains in decent nick – German joblessness data for this month pointed to a slightly lower than anticipated contraction in the pace of employment creation in the vast Teutonic economy, while the overall level of German joblessness remained at a relatively containable 6.1%.

Meanwhile, German Retail Sales numbers for May marginally beat expectations, printing at a year-on-year 2.6%.

The good news from Germany, in combination with the slightly worrisome tone of today’s UK data, helped send the Pound Sterling euro exchange rate down into the very low 1.2000s GBP EUR during early trading.

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TAGS: Euro Forecasts Pound Euro Forecasts Pound Sterling Forecasts