Will UK growth data help the pound recover?

The pound flip-flopped for much of Wednesday, with gains recorded in the morning being largely wiped out by the afternoon.

GBP/EUR fell from €1.1612 to €1.1546, GBP/USD recovered from $1.2927 to $1.2995 and GBP/AUD fluctuated between AU$1.7272 and AU$1.7402. GBP/CAD, meanwhile, plummeted to a one-month low of C$1.7377 after the Bank of Canada (BOC) rate decision.

Keep reading to find out what we can expect from the currency market today…

What’s been happening?

The combination of an almost drearily quiet economic calendar and a lack of dramatic political developments left the currency market on a fairly even keel on Wednesday.

The GBP/EUR exchange rate clearly didn’t find European Central Bank (ECB) President Mario Draghi’s speech particularly stirring.

The pound closed the day lower against the euro despite Draghi sticking to his guns and defending the current level of stimulus being deployed by the central bank. The euro remained fairly sturdy even though Draghi offered no support to German Chancellor Angela Merkel’s comments that the ECB’s policy plans were keeping the currency weak.

GBP/CAD also dropped following the Bank of Canada’s (BOC) latest interest rate decision.

While the BOC made it clear it has no plans to change policy at present, it did adopt a slightly more optimistic tone than usual and that was enough to give the Canadian dollar a lift.

Meanwhile, the minutes from the Federal Reserve’s May policy meeting saw hopes for a June interest rate increase dip slightly, helping GBP/USD advance. While the Fed did say rates would be raised ‘soon’, many remain dubious about how much borrowing costs can actually climb while the US political and economic landscape remains so uncertain.

What’s coming up?

The week’s most influential UK data is set for release this morning, and given that political campaigning was suspended in the wake of Monday’s terrible terror attack in Manchester, economic motivations are likely to be the main source of pound movement.

The release really in the spotlight this morning is the UK’s Q1 growth figures, which are expected to show that the rate of expansion slowed to 0.3% in the first three months of the year.

Confirmation that the national economy is faltering in the face of stagnant wage growth and soaring inflation could weaken GBP exchange rates. However, if the figure is positively revised the pound might just be able to rack up some gains.

Other UK news to watch out for includes the BBA loans for house purchase number.

The only scheduled event likely to impact the euro is a speech from European Central Bank (ECB) vice-president Vitor Constancio. Significant EUR fluctuations are unlikely unless he makes any surprising statements about financial policy, and given Draghi’s remarks yesterday that seems unlikely.

Over in the US we’ve got the nation’s trade balance and initial jobless claims figures. The reports are hardly major market movers but they may have a modest impact on GBP/USD.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.