UK CPI: British Pound to Dollar, Euro Exchange Rates Bounces Off 2010 Low

August 15, 2016 - Written by Frank Davies

STORY LINK UK CPI: British Pound to Dollar, Euro Exchange Rates Bounces Off 2010 Low

Today's big British pound risk event sees GBP to face additional volatility versus the euro and the US dollar as sterling investors brace for the latest UK CPI

In Breaking News, the British inflation rate rose in July according to the latest release from the ONS today.

The GBP/EUR jumped off 2010 lows to reach 1.5160 shortly after the report was issued.

Let's look at the latest currency rates:

• The Pound to Euro exchange rate today: -0.03% at 1.15160 EUR.
• The Pound to Dollar exchange rate today: +0.73% at 1.29750.

The pound sterling has also slipped yet further against the US dollar, despite USD strength suffering the latest FED hike rate speculation.

A slew of inflation data releases dominate tomorrow’s session in the global currency market.

Holders of the Pound Sterling (currency : GBP) will be hoping for a print of above the expected 0.5% from the July Consumer Price Index (CPI) data to prop up the UK unit following its dire performance of last week.

GBP Worst Performing Currency in 2016

Sterling has sunk against all of the other sixteen most actively traded global currencies over the last seven days thanks to the Bank of England’s heavy hints in the minutes of this month’s MPC meeting that another domestic interest rate cut could be on the cards before the end of the year.

However, any suggestion from the UK CPI numbers that the recent drop in the value of the Pound is beginning to import inflation into the local financial system could stop the BoE indulging in any further policy loosening in the short-to-medium term.

America’s Federal Reserve remains on a very different policy path to the UK central bank; at the time of writing, futures markets currently price-in a 61.3% chance that US interest rates will still be at the current banding of 25 – 50 basis points come the end of the year.

Odds of US Rate Hike Forecast to Impact GBP/USD Exchange Rate Trading

The same futures markets suggest that investors will have to wait until June of next year for the Fed to increase the cost of borrowing Stateside.

A showing of above the expected year-on-year result of 0.9% will be required from tomorrow afternoon’s US Consumer Price Index inflation data in order for market participants to increase their expectations of an American rate hike this year; such a result would improve the US Dollar (currency : USD) forecast, pushing the GBP USD exchange rate lower.

Thursday’s Australian labour market statistics for July and the next day’s Canadian inflation data provide the main points of interest during the second half of the week.

Analysts forecast that below expectation showings from either could send the GBP AUD and GBP CAD exchange rates higher.

Pound to Dollar Exchange Rate Forecast

In their latest note to clients, Lloyds note the pound to dollar's path towards 1.2798 lows seen back in July:

"Rebounds continue to struggle to gain any traction, as GBPUSD sold off aggressively after spiking to 1.3035 following the weak US retail sales data." say Lloyds.

"1.3060/80 is intra-day resistance today. A move through there is needed to suggest a return to channel resistance at 1.3300/20."

"While under, a break of current support in the 1.2940/30 region risks a re-test of the 1.2798 lows set on the 6th July."

"A subsequent break sees little support below till the 1.25 region."

Currency Exchange Rates Today

Yesterday's foreign currency markets saw the Pound Australian Dollar exchange rate close at 1.68639, Pound Canadian Dollar exchange rate close at 1.67298, Pound Euro exchange rate close at 1.15626 and the Pound to US Dollar exchange rate close at 1.29093.

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