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Volatility Forecast for Pound Sterling in FX Markets

December 21, 2015 - Written by John Cameron

Market Volatility Expected Before Year-End

It might be Christmas week across the Western world, but trading will continue in the global markets throughout the festive period and it remains highly possible that major market move could take place between now and the end of the year.

Investors eyeing the market would do well to remember back to the last few days of 2008 at this time; the Pound Sterling euro exchange rate had started December 2008 comfortably lodged in the 1.2000s, but by the 30th December, the GBP EUR exchange rate had tumbled to a fresh record low of just above the 1.0200 threshold.

Thin trading volumes can make for marked volatility, particularly at a time when market participants remain unsure of the future direction of travel for several major central banks’ monetary policy.

This week’s tier one data releases, although relatively thin on the ground, could give the Pound Sterling (currency : GBP) a shunt in one direction or the other against more than one of the other most actively traded global currencies.

Hawkish Fed Bets Keep US Dollar Trading in Strong Position

Analysts forecast that Wednesday’s session has the potential to be market-moving, with the publication of two key data sets from the States.

A strong showing from November’s US Durable Goods Orders data and the latest US Personal Consumption Expenditure Core data could convince FX insiders that last Wednesday’s Fed rate hike was not a case of ‘one and done’, causing investors to ramp up their expectations regarding the timing of the next US Federal Reserve interest rate.

Such an outcome could potentially send the Pound sterling US Dollar exchange rate down into the middle part of the 1.4000 – 1.5000 GBP USD range.

Japanese Consumer Prices to Provoke GBP/JPY Volatility

Meanwhile Christmas Eve brings the release of Japanese Consumer Price Index inflation data; if the official figures reveal that the pace of year-on-year price rises have increased from the last showing of 0.3%, then the Yen could build on the gains which it posted against the Pound last week.
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