UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate edged fractionally higher by around 0.2% on Friday morning.
In response to the European Central Bank (ECB) interest rate decision the single currency rallied versus its peers. The uptrend opened up some attractive selling positions as trader profit taking has caused the Euro to edge lower from best rates on Friday morning.
The Pound, meanwhile, has seen a mixed performance versus its currency rivals. Positive New Car Registrations data had minimal impact, and with an absence of further domestic data the Pound is likely to continue to see movement in response to market volatility.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3885.
Yesterday…
GBP/EUR Conversion Rate Predicted to Plummet despite Positive British Services Output
The Pound Sterling to Euro (GBP/EUR) exchange rate dived by around -1.5% on Thursday afternoon.
In the wake of the European Central Bank’s (ECB) policy decision the Pound advanced versus the majority of its most traded currency rivals. Significant losses against the common currency can be attributed to Euro strength rather than Sterling weakness. The Pound advanced versus its peers following November’s Services PMI, which eclipsed expectations. The robust services output softened concerns regarding slower-than-anticipated manufacturing and construction sectoral growth.
Commenting on the Services PMI data, Chris Williamson, Chief Economist at Markit said: ‘A welcome upturn in service sector expansion helped counter slower growth in manufacturing and construction in November, suggesting the UK continues to enjoy the ‘Goldilocks’ scenario of solid economic growth and low inflation. The survey data so far are pointing to 0.6% GDP growth in the fourth quarter, and no change in average prices charged for goods and services. The rate of job creation remained resiliently robust in November despite widespread difficulties finding suitable staff and worries about the introduction of the National Living Wage, in turn leading to reports of rising wages.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3872.
EUR/USD Conversion Rate Predicted to Rally after Draghi Shocks Markets
Having made several dovish speeches of late, ECB President Mario Darghi shocked markets today by announcing an extension to quantitative easing, now set to finish in March 2017, but failing to extend asset purchases. Against a smaller-than-anticipated deposit facility rate cut, of just 10 basis points, the relative inaction caused the single currency to surge versus its peers after a much larger cut was factored in to Euro valuation.
Ben Brettell, Senior Economist at Hargreaves Lansdown, stated that Mario Draghi appears to have over-promised and under-delivered. ‘Markets expected Draghi to deliver a combination of rate cuts and tweaks to the ECB’s QE programme. The deposit rate for commercial banks was already in negative territory at -0.2% and analysts had predicted a cut of between 0.1 and 0.2 percentage points. The cut to -0.3% therefore left markets somewhat underwhelmed. The other two key interest rates were left unchanged. Far more exciting for the markets were the expected tweaks to QE in the subsequent press conference. The current programme of €60 billion of asset purchases per month has been extended by six months, to March 2017 (or beyond if necessary). ECB has also expanded the range of assets being purchased, to include regional and local government debt.’
Brettell added: ‘However, this does little to provide an immediate boost to the economy. Markets had been hoping for an acceleration of QE, i.e. an increase to the €60 billion monthly figure. The disappointment in financial markets is palpable this afternoon. The euro has strengthened (which won’t help the Eurozone economy) and stock markets have fallen on the announcements.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3805 today.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Losses ahead of German Factory Orders
Given the extent of the Euro rally against the Pound, and with an absence of further domestic data to provoke changes, the Pound Sterling to Euro (GBP/EUR) exchange rate is very likely to hold losses for the remainder of Thursday’s European session. Friday may see heightened GBP/EUR volatility, however, with German Factory Orders and Construction PMI due for publication. In terms of British data, November’s New Car Registrations is unlikely to hugely influential.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.4184 during Thursday’s European session.