UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate declined by around -0.3% on Friday morning.
Over the past few days the Pound fluctuated versus its peers as markets readjusted from the chaos of ‘Black Monday’. Volatility has settled somewhat in the early stages of Friday’s European session, and the Pound is generally trending positively versus its major peers thanks to better-than-expected consumer confidence in August.
The Euro, meanwhile, advanced versus its major competitors thanks to its new found status as a safe-haven asset. Many analysts predict a period of Euro appreciation tanks to its inverse relationship with the US Dollar. In addition, the prospect of delays to Federal Reserve and Bank of England (BoE) rate hikes is Euro supportive.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3661.
Yesterday…
Pound Sterling (GBP) Exchange Rate Forecast to Edge Higher against the Common Currency despite Potential BoE Rate Hike Delays
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.2% on Thursday afternoon.
Over the past few days the Pound has found some support thanks to its minimal connection to the Chinese equity market and the Yuan. However, the Pound’s gains have been rarely sustained and any appreciation has been somewhat sluggish. This is mainly due to fears that the fallout from ‘Black Monday’ on the global market will cause Bank of England (BoE) policymakers to delay a benchmark rate hike. Many analysts have now pushed back speculation of a first-quarter cash rate hike in 2016 to the third-quarter.
During Thursday’s European session the Pound is still holding a comparatively weak position versus its major peers with the exception of commodity-correlated currencies. Although the British asset appreciated by 0.5% against the common currency during the early stages of Thursday’s London session, the 1.37 exchange rate is still low when compared to levels before last Monday.
Mixed results from economic data had minimal impact on the Pound. Augusts’ Nationwide House Prices gained by 3.2% on the year; bettering the market projection of 3.1% growth. However, on a monthly basis, Nationwide House Prices came in at 0.3% growth; slightly below the median market forecast 0.4% price increase. ‘A significant increase in construction activity is required if affordability is not to become stretched in the years ahead,’ stated Nationwide Chief Economist Robert Gardner.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3680.
Euro (EUR) Exchange Rate Forecast to Tick Lower against the UK Pound (GBP) as Traders Readjust Currency Values
‘Black Monday’ caused extreme volatility in the currency market. This saw commodity-correlated and emerging-market assets dive whilst the single currency rallied. Traders have since attempted to readjust market levels to more appropriate values. As a consequence, the common currency declined versus its currency competitors. However, the Euro downtrend has been slow as it holds a relative position of strength versus its major peers.
One major reason the Euro has managed to hold gains is its new found status as a safe-haven asset. Stuart Bennett, London-based head of G-10 currency strategy at Banco Santander SA noted the inverse relationship between the Euro and the US Dollar after the single currency rose to its highest level since mid-January amid panic selling. ‘Given the current level of the equity markets, the Euro is under-valued,’ Bennett said. ‘If you are just playing off of European equities, then you could say we should be buying the Euro. There is a nice negative correlation if you look at the last year. It’s very strong.’
Credit Agricole analysts have predicted near-term upward pressure for the common currency not just as a result of its safe-haven status. The impact of China’s equity market crash was such that traders were forced to delay bets as to the timing of Bank of England (BoE) and Federal Reserve benchmark rate hikes. Given that the European Central Bank (ECB) is quite a way behind other major central banks in terms of policy outlook, the delays are Euro supportive.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3630 today.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Gains ahead of UK Consumer Confidence
Whilst the market readjusts to appropriate levels, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold gains during Thursday’s European session. However, the shared currency’s new found safe-haven status and speculation of long delays to a BoE rate hike could see the pairing settle at around 1.38 in the long-term.
Friday will see GBP/EUR volatility with the publication of British consumer confidence in August. Friday will also see UK second-quarter Gross Domestic Product which will provoke changes for the British asset. In terms of European economic data, the German Consumer Price Index will be of significance. German inflation data will be of particular importance given recent speeches from ECB officials who stated that policy could be eased if inflation doesn’t pick up.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3732 during Thursday’s European session.
