Pound edges slightly higher | Dollar slightly down

On the agenda this week is a meeting of the Bank of England (BoE), which investors will be analysing closely for any change in UK policy.
 
Also meeting this week is the US Federal Reserve. Analysts are expecting that the Fed will raise US interest rates at the meeting that starts on Tuesday.
 
Meanwhile, the euro is awaiting economic data releases this week, while the Norwegian krone has been boosted by rising oil prices.
 
Pound edges slightly higher
 
The pound has been edging slightly higher as UK chancellor Philip Hammond prepares to testify to a House of Commons committee about his Autumn Statement. Analysts have said that the gains for sterling suggest that investors predict a rise in government spending will lower the need for stimulus.
 
This week, investors will be looking towards the BoE meeting on Thursday. Experts have said that although it is unlikely there will be any significant changes, there is the possibility of further stimulus measures being introduced thanks to the continued uncertainty over Brexit.
 
Analysts are now beginning to make predictions for 2017 as the Christmas and New Year break approaches. Some have suggested that with a recession expected to begin next year, the pound could end up at parity with the euro.
 
Euro not expected to see great changes
 
The euro is not expected to see great changes in its exchange rates with rival currencies this week.
 
Thursday will see the release of Manufacturing and Services Purchasing Managers Index (PMI) for December, which are both expected to be 53.8. Then consumer price index (CPI) data will be released on Friday. Analysts are expecting it to show a year-on-year rise of 0.6% in November.
 
If the results are as expected, the euro could see a slight boost. However, the currency has been largely subdued in the last few weeks, a reaction to uncertain political events in European Union (EU) member states.
 
Dollar slightly down
 
This morning (12 December), the dollar was down slightly from the highs it has recently experienced. However, investors are looking ahead to the Federal Reserve meeting this week.
 
On Tuesday, the Fed will meet for two days to discuss monetary policy. It is widely anticipated that interest rates will be raised. The expectation of the rise has strengthened the dollar for many weeks.
 
However, it is thought that if the Fed does announce an interest rate increase, it will not alter the dollar’s exchange rate with other currencies. This is because analysts are expecting it to happen.
 
It is thought that Fed chair Janet Yellen’s speech could be the more important aspect of the meeting, with analysts and investors likely to pay close attention in order to work out what the Fed may have planned for the future. If Ms Yellen expresses hope for economic growth, it could give the dollar a boost.
 
Norwegian Krone experiences boost overnight
 
The Norwegian krone experienced a boost overnight due to rising oil prices, which saw an increase after a number of large non-Organization of the Petroleum Exporting Countries (OPEC) producers agreed to join an OPEC-led output reduction scheme at a meeting held over the weekend. It follows an OPEC deal agreed at the end of November.
 
Analysts are now expecting the krone to be stronger at the end of the year and into 2017.