UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.2% on Friday morning.
With a complete absence of domestic data to provoke volatility, the Pound edged lower versus its major peers on Friday, The depreciation is mostly the result of a RBS advising investors to safe-guard against a brexit in 2017. The Euro, meanwhile, halted losses after domestic data provided mostly positive results. The Eurozone manufacturing, services and composite PMIs all bettered the respective median market forecast figures.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3850.
Yesterday…
GBP/EUR Conversion Rate Predicted to Surge after Better-than-Expected British Retail Sales Growth
The Pound Sterling to Euro (GBP/EUR) exchange rate strengthened by around 1.6% on Thursday afternoon.
After a surprise surge in September’s British retail sales growth, the Pound Sterling rallied versus nearly all of its most traded currency competitors. On the year, September’s Retail Sales advanced by 5.9%; eclipsing the median market forecast 4.7% increase. On the month, Retail Sales bettered the 0.4% growth estimate with September’s score hitting 1.7%. In addition, Retail Sales including Auto Fuel came in above the market consensus. This is positive for the Pound because it suggests a potential recovery in consumer prices which will pressure the Bank of England (BoE) into hiking the benchmark interest rate.
‘Falling in-store prices and promotions around the Rugby World Cup are likely to be the main factors why the quantity bought in the retail sector increased in September at the fastest monthly rate seen since December 2013,’ Office for National Statistics (ONS) statistician Kate Davies said. With the British domestic recovery looking comparatively robust, many economists are going as far as to predict that the Bank of England (BoE) will overtake the Federal Reserve when it comes to tightening monetary policy.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3810.
EUR/GBP Exchange Rate Forecast to Hold Losses on Dovish Draghi Speech
After the European Central Bank (ECB) interest rate decision saw policymakers opt to hold rates and keep the asset purchase program unchanged, the shared currency dived versus its major peers. Whilst holding the benchmark interest rate and program of quantitative easing would ordinarily be supportive of demand for the common currency, the accompanying speech from President Mario Draghi caused the damage. Draghi stated that policymakers are prepared to use any tools at their disposal should it become necessary, and the lack of price pressures has led to expectations that the asset purchase program will be re-examined in December.
‘There was a very rich discussion about all monetary instruments that might be used… and the conclusion was: we are ready to act if needed,’ stated Draghi.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3580 today.
Pound Sterling to Euro (GBP/EUR) Conversion Rate Forecast to Hold Gains on Dovish Draghi
Given the dovish speech from Draghi following the ECB interest rate decision, and with the significant improvement in UK retail sales growth pressuring the BoE, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold gains for the remainder of Thursday’s European session.
With an absence of further British economic data for the remainder of the week, the Pound will likely see volatility in response to any news from Chinese President Xi Jinping’s economic state visit. Any news from BoE policymakers with regards to the potential for a near-term inflationary recovery would also aid the Sterling uptrend.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.3831 today.
