- Euro Pound Exchange Rate Nears One-Month High – Briefly breaks past 0.86
- Low Fed Rate Hike Bets Strengthen Euro – Euro capitalises on US Dollar selloff
- Update: UK Public Sector Net Borrowing Stats Mixed – Fail to inspire GBP movement
- Forecast: Fed Decision Could Inspire EUR GBP Wednesday – Eurozone PMIs on Friday
Euro Pound Exchange Rate Flat During Wednesday’s European Session
Despite having the week’s only influential UK ecostats published, Wednesday’s session did little to inspire the Euro Pound exchange rate, with EUR GBP generally fluctuating in a relatively flat range throughout the day.
The pair struggled to maintain its best levels, but remained above the week’s opening levels despite some decent UK economic news as markets appeared to remain bearish on the British economy.
Britain’s August public sector net borrowing score beat expectations – but only slightly. The figure was expected to worsen by a 10.4b deficit in August, but instead worsened by 10.1b.
However, soon after this figure was published the Office for National Statistics (ONS) also published a report claiming that Britain’s economy had thus far seen little definite effect from the Brexit vote. The report stated;
‘The post-referendum picture is still emerging and will continue to do so over coming months, quarters and years. Information so far generally covers short-term indicators with other important information not yet available. Nevertheless, there has been no sign of a major collapse in confidence and, within the data that is available, some indicators of strength.’
The Euro was able to hold its ground throughout the day, as investors held firm on the possibility of disappointing Federal Reserve news – news that could potentially lead to a EUR/USD rally.
(Previously updated 9:38 BST 21/09/2016)
With demand for Sterling in sharp decline, the Euro Pound exchange rate was able to advance – with EUR GBP achieving a high of 0.8628 over the course of trading. Will this uptrend continue? Well, if the BoE continues hinting that it intends to expand easing measures in the near future the Pound is more than likely to post further losses.
Euro Pound Exchange Rate Closer to Post-Brexit Highs on Tuesday
The Euro Pound exchange rate briefly touched on highs above 0.8620 on Tuesday afternoon as the Euro was able to capitalise on a Pound selloff.
After a brief recovery from its cheapest levels on Monday, the Pound could be set to fall even further for the remainder of the week with some analysts predicting new post-Brexit-vote lows for the currency.
EUR GBP’s highest post-Brexit-vote level is 0.8677, which it reached in the middle of August. The pair is currently only around half a penny away from that key level.
According to Bloomberg, the latest reason for the Pound’s drop in value was a repeated tone from European Union leaders that Britain would not be able to keep access to the single market following a Brexit.
‘Most of the remaining EU members agree that Britain can’t maintain its current trade ties while also meeting the wishes of voters from the Brexit ballot to clamp down on immigration. The hardening position of the bloc’s 11 ex-communist members has narrowed London’s room for maneuver.’
The Euro could strengthen slightly on Wednesday evening if the Federal Reserve disappoints US Dollar investors causing a EUR/USD buy-up. However, Sterling’s advance potential is a little more limited.
(Published 12:06 BST 20/09/2016)
The Euro Pound exchange rate dipped on Monday as investors bought the Pound after its cheap Friday lows. However, as Sterling sentiment remained weak and lacked the data or drive to advance, it quickly softened again. The Euro ultimately advanced as a US Dollar selloff bolstered demand the common currency.
EUR GBP briefly fell to a low of 0.8537 on Monday before returning to the week’s opening levels of 0.8581. On Tuesday morning, the US Dollar’s weakness boosted the Euro, allowing the currency to hit 0.8604 – its highest point in almost a month.
Euro (EUR) Takes Advantage of Weak US Dollar to Advance
Exchange rates involving the Euro and US Dollar are some of the most-traded in the foreign exchange market, meaning the Euro is one of the ‘Greenback’ Dollar’s biggest rivals.
As a result, the Euro was one of the first currencies to advance thanks to this week’s US Dollar selloff, as markets predicted a Federal Reserve interest rate hike as being highly unlikely.
Monday’s Eurozone data did little to influence Euro movement. The Eurozone current account report for July fell from 29.6b to 21b, but Eurozone construction improved from 0.3% to 1.8% in July. This brought the yearly construction score up from 0.6% to 3.1%.
The Euro was also not hindered hugely on Tuesday by the latest deflation in German producer prices. Producer prices fell by -0.1% in August, but the yearly score lightened from -2.0% to -1.6% as expected.
Pound (GBP) Struggles to Hold Ground on Lack of Data
Sterling investors lack the motivation to bring the currency’s value higher – that’s the conclusion we can reach after the currency quickly gave up on advancing after a limited Monday recovery attempt.
This week’s lack of influential British data hasn’t helped, with investors generally bearish on the currency following last week’s Bank of England (BoE) news.
The bank made sure to remind markets that further easing was still possible in the coming months unless September data impressed.
BoE policymaker Kristin Forbes also dampened Sterling’s gain potential by embracing the currency’s low value due to chances it might help relieve Britain’s trade deficit. Reuters reported;
Sterling’s hefty slide since Britain voted to leave the European Union should significantly narrow the country’s current account deficit, Bank of England policymaker Kristin Forbes said on Friday.
Speaking at a conference in Paris, Forbes said Sterling’s 10 percent fall against the Dollar and the Euro was leading to some automatic adjustments to Britain’s current account deficit, one of the largest of any advanced economy.
Euro Pound Exchange Rate Forecast: UK Public Finances Report on Wednesday
The Euro to Pound exchange rate is likely to continue advancing for the remainder of the week if recent trends in data and economic news continue. However, there will be a few opportunities beginning Wednesday for a shift in direction.
Wednesday will see the publication of Britain’s only relatively influential dataset for the week. This set will include August prints for public finances and public sector net borrowing.
Public sector net borrowing is expected to have worsened from -1.5b, a surplus, to a considerable deficit of 10.4b, potentially due to the Brexit vote.
If this figure comes in better-than-expected the Pound could advance, but if the report reveals that higher borrowing happened as a result of the Brexit vote the Pound could weaken even further.
As for the Euro, key Eurozone data is not due for publication until Friday’s preliminary September PMIs from Markit. However, it is possible that the Euro will be moved by global cross-flows from Wednesday evening’s Federal Reserve policy decision.
If the Fed plays up the possibility of a 2016 US rate hike or even shocks markets with a September rate hike, the Euro could weaken as it is sold off in favour of its US Dollar rival. However, if the Fed indicates that a 2016 rate hike will no longer happen the Euro could strengthen further.
At the time of writing, the Euro Pound exchange rate trended in the region of 0.8595, while the Pound Euro exchange rate traded at around 1.1635.
