In spite of less dovish commentary yesterday the Bank of England (BoE) has revised down its 12-month Inflation Forecast this morning, setting the Pound (GBP) on a downtrend.
Bank of England (BoE) Meeting Minutes Proved Encouraging for Traders as GBP/EUR Pairing Climbed
Although the Bank of England (BoE) Rate Decision did not prove surprising, with the Monetary Policy Committee (MPC) voting 8-1 to leave interest rates unchanged from the 0.5% benchmark, the Pound (GBP) experienced a relatively strong day of trading against many of the majors. The meeting minutes revealed that, while Chinese slowdown concerns had dominated discussion, policymakers remained cautiously confident in the resilience of the domestic economy and their outlook for a rate hike in the coming months. Buoyed by the unexpected hawkishness of this tilt the GBP/EUR exchange rate peaked at a daily best of 1.3802, however, the pairing proved unable to maintain this momentum for long as it shed value throughout the rest of the day.
While the common currency (EUR) was held back over recent days due to a lack of domestic economic data investors were inclined to be more cautious due to returning fears of a potential Grexit. As polls have continued to show that former Prime Minister Alexis Tsipras stands little chance of returning to power with the majority he had hoped for, European Commission President Jean-Claude Juncker reiterated that the Hellenic republic will be expected to abide by the agreed terms of its August bailout plan. In lieu of any encouraging figures these rumbles of fresh Eurozone turmoil have been substantially diminishing the appeal of the Euro.
Solid German CPI Shores up Euro (EUR) Today as Bank of England (BoE) Revise Inflation Rate Forecast Down
However, this morning has seen a decided turnaround for the single currency as German Consumer Price Index data clocked in unchanged as forecast. Although this was only the finalisation of earlier provisional figures for August, the lack of surprise has helped to somewhat shore up the Euro ahead of the weekend. This reassurance that the impact of recent turmoil has not affected the domestic level of inflation too dramatically has seen gains across the board for the common currency, pushing the GBP/EUR conversion rate into a distinct downtrend.
UK Construction Output has been revealed to have fallen in July, with an unexpectedly severe contraction of -0.7%, as the BoE 12-month Inflation Forecast was revised down from 2.2% to 2%. Showing that, in spite of a relatively positive stance towards an interest rate hike in the next year, the MPC has lost confidence in their previous projection of the degree of increase in domestic inflation. Rather more dovish than yesterday’s data, this is now seeing the GBP/EUR exchange rate slip further.
GBP/EUR Exchange Rate Forecast: Meeting of Eurogroup Finance Ministers Could Reverse Present Trend
Tomorrow’s Eurogroup meeting may spur some further movement for the common currency, depending on the direction of the sentiment exhibited by the various Eurozone Finance Ministers. The stance taken towards Greece in particular could prove influential, with the taking of a harder line unlikely to benefit the Euro given the present political conditions within the Hellenic nation.
Sterling could also produce a stronger rally next week with the release of the UK’s August Consumer Price Index data, with any supportive evidence of the domestic economy’s current state of recovery sure to inspire a resurgence for the GBP/EUR currency pair.
Current GBP, EUR Exchange Rates
At time of writing the Pound Sterling to Euro (GBP/EUR) exchange rate is trending at 1.3672, while the Euro to Pound Sterling (EUR/GBP) pairing is in the range of 0.7313.
