Euro (EUR) Exchange Rate Forecast to Decline against the Yuan (CNY) on Eurozone GDP
The Euro to Chinese Yuan (EUR/CNY) exchange rate was trending within a narrow range on Friday afternoon.
European economic data produced mixed results on Friday which err towards negativity. Of particular disappointment was second-quarter German Gross Domestic Product which came in at 0.4%; below the market projection of 0.5% growth. Additionally, second-quarter French growth stagnated and Italian GDP also missed estimates on a quarterly basis. This has had a detrimental impact on second-quarter Eurozone Gross Domestic Product, which came in at 1.2% on the year; slightly below the market consensus of 1.3% growth.
‘Business surveys have suggested that the Eurozone economy lost some momentum over recent months, which could reflect some fallout from the Greek crisis and potentially weakness in the Chinese economy,’ said Nick Kounis, an economist at ABN Amro Bank NV in Amsterdam. ‘Nevertheless, there are plenty of domestic positives coming through and we think the Eurozone economy will regain momentum in the coming quarters.’
The disappointing German growth figures are being taken with a pinch of salt by most analysts given that Germany’s fundamentals remain solid. ‘Exports are a key pillar for the German economy and global demand is currently too low to sustain it at full speed,’ said Johannes Gareis, an economist at Natixis SA in Frankfurt. ‘But the German economy finds itself generally in a comfortable situation and in fact it is set to profit from increasing tailwinds in the coming months.’
The Euro to Chinese Yuan (EUR/CNY) exchange rate is currently trending in the region of 7.1373.
Chinese Yuan (CNY) Exchange Rate Forecast to Strengthen against the Common Currency (EUR) as PBoC Raises Reference Rate
On Thursday the Chinese Yuan halted a three day slide after the People’s Bank of China (PBoC) raised its reference rate and reassured markets it would intervene in order to prevent excessive swings. ‘They’re OK with a modest depreciation, but they don’t want the depreciation to get out of hand,’ said Dennis Tan, a currency strategist at Barclays Plc in Singapore.
With a complete absence of domestic data to drive changes, and with sentiment improving as it seems China’s central bank is in control, the Yuan is likely to continue trending higher versus its major peers during Friday’s European session. This is not to say that PBoC intervention has stopped altogether, however. ‘The PBOC sent its signal and people understand it’ll be very difficult to go against the PBOC’s will,’ said Ken Peng, a Hong Kong-based strategist at Citigroup Inc. ‘The central bank will frequently intervene in the foreign-exchange market in the next three months because it needs to ensure the Yuan is stable.’
The Euro to Chinese Yuan (EUR/CNY) exchange rate dropped to a low of 7.1215 today.
Euro to Chinese Yuan (EUR/CNY) Exchange Rate Forecast to Hold Losses on Eurozone GDP
Given that individual nations have posted lower-than-expected growth, the Eurozone Gross Domestic Product is likely to follow suit. Therefore, the Euro to Chinese Yuan (EUR/CNY) is likely to hold losses for the remainder of Friday’s European session. With that being said, however, Eurozone inflation data may provoke single currency volatility.
The Euro to Chinese Yuan (EUR/CNY) exchange rate climbed to a high of 7.1426 today.
