Pound exchange rates slump in wake of gloomy growth forecasts
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he Pound fell against the majority of its peers yesterday, with the currency coming under pressure in the wake of UK growth forecasts being slashed.
Looking forward, the focus for today is likely to be on the euro, following speeches by some prominent members of the European Central Bank.
What’s been happening?
The start of this week’s session saw the pound strike lower across the board as it was undermined by the latest growth forecasts from the British Chambers of Commerce (BCC). Sterling sentiment sank on Monday as the BCC slashed its 2018 growth forecasts to their lowest levels since the financial crisis, with economists expecting the UK economy to expand just 1.3% this year. The gloomy outlook was largely due to rising global uncertainty, with both Brexit and trade war fears dragging on confidence and leading consumers to become increasingly conservative with their spending. The weakness in the Pound saw the GBP/EUR exchange rate relinquish a notable portion of the gains it made last week in the wake of the European Central Bank’s (ECB) pledge to leave interest rates on hold. The euro was also strengthened by reports suggesting that German Chancellor Angela Merkel had defused a row over migrants that had threated to split the ruling coalition. Meanwhile the GBP/USD exchange rate ticked lower on Monday as concerns of a US-China trade war began to fade, helping the US dollar recoup some of Friday’s losses.
What’s coming up?
Looking ahead, the absence of any data may limit the pound’s potential to advance on Tuesday, especially if it prompts markets to refocus on Brexit. This could see Sterling falter after a defeat in the House of Lords will see the government face another vote in the Commons in order to pass its EU withdrawal bill. The euro meanwhile is likely to find its movement being driven by news coming from the central bank forum currently taking place in Portugal, with speeches by ECB President Mario Draghi, and Chief Economists Peter Praet likely to be the highlight of the day. Finally a speech by the Federal Reserve’s James Bullard is the only noteworthy event on the US data calendar today, with the US dollar possibly advancing should his comments sound hawkish in tone.