Pound Sterling GBP Exchange Rate Forecast Deteriorates on UK Inflation Stats and China Trade Data

Published: Tuesday, 13 October 2015 15:00 BST - Written by John Cameron

STORY LINK Pound Sterling GBP Exchange Rate Forecast Deteriorates on UK Inflation Stats and China Trade Data

GBP Exchange Rate Outlook and Currency Market Forecast: FX Today

Today has proved to be a dismal session for investors holding Pound Sterling (currency : GBP)-denominated assets. The initial signs on the day were positive for the Pound, against the high-yielding Commodity Dollars at least, following the publication of a hugely disappointing set of Chinese trade figures during the overnight Asian session. The official numbers revealed that the level of imports into China was over 20% lower in Yuan terms last month than it had been in September 2014, providing further evidence that China’s so-called economic miracle is vanishing.

Pound Sterling to Australian Dollar, Canadian Dollar, New Zealand Dollar Conversion Rates Gain on Chinese Trade Data

The Pound Sterling Australian Dollar exchange rate jumped to above the 2.1000 GBP AUD threshold as a response, and the Pound New Zealand Dollar GBP NZD and Pound Canadian Dollar GBP CAD exchange rates recorded similar gains.

Foreign Exchange News: Pound Sterling Exchange Rate Broadly Softer after UK CPI Report

However, the forward move for the Pound against the high-yielders proved to be ephemeral; the latest UK Consumer Price Index statistics, published at 0930hrs BST this morning, showed that for the second time since the 1960s, the domestic economy had plunged into deflation last month. With prices rising at a rate of -0.1%, an interest rate hike from the Bank of England now appears further away than had ever been the case and support for the UK unit evaporated. The news sent the Pound Sterling euro exchange rate down to its lowest level since February at 1.3335 GBP EUR, while the Pound US Dollar exchange rate slid to 1.5198 GBP USD.

Dovish BoE Predicted to Keep GBP Trending Lower against EUR, USD

The pain for the Pound was compounded by comments from the Bank of England’s newest monetary policy committee member to the Treasury Select Committee earlier. Gertjan Vlieghe struck a dovish tone on policy setting when he told UK lawmakers that the deteriorating global economic picture appeared to be deteriorating and that this situation had to play a part in UK policy decisions. Vlieghe observed that, ‘we absolutely have to take into account that we are operating in a global environment, which is adverse, so to speak, in that there are headwinds to growth.’ The forecast for the Pound Sterling in the near-term now appears negative.

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