UPDATE
The Euro to Pound Sterling (EUR/GBP) exchange rate edged higher by around 0.2% on Wednesday morning.
Although German Services and Manufacturing PMIs missed the respective median market projections, the shared currency ticked higher versus most of its major peers. This is likely due to the fact that the German data was very close to expectations and the results still showed positive growth in the sectors. Eurozone Manufacturing and Services PMIs, due for publication later on Wednesday morning, have the potential to provoke changes for the single currency.
After Tuesday’s finances data showed the British government borrowed more-than-anticipated in August, the Pound softened versus its major peers. The British asset continues to hold a weak position after China’s Shanghai Composite Index ended the session down. Chancellor George Osborne recently announced plans to merge the UK stock markets with China’s. Given the instability of the market, and with China’s economy showing every sign of slowing, increased exposure to the Far East nation has seen dampened demand for the UK asset.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7250.
Yesterday…
GBP/EUR Conversion Rate Predicted to Trend Lower after the UK and China Attempt to Link Equity Markets
The Pound Sterling to Euro (GBP/EUR) exchange rate declined by around -0.5% on Tuesday afternoon.
After it was announced that the UK struck a deal with China to attempt to merge equity markets, the British asset softened versus many of its currency rivals. At a time when China’s economy is slowing, and the Shanghai Composite Index is far from stable, many experts believe that the UK should avoid greater exposure to China. ‘I want to see our stock markets in London and Shanghai formally connected, with UK firms raising funds from Chinese savers, and Chinese firms listing in London,’ Chancellor George Osborne said. ‘Whatever the headlines, regardless of the challenges, we shouldn’t be running away from China,’ said Mr Osborne, adding that he ‘very deliberately chose’ the location of the stock exchange to send out his message.
Aiding the Pound’s depreciation on Tuesday morning was less-than-ideal domestic data. Of particular disappointment was Public Sector Net Borrowing, which showed government debt reached 11.3 billion in August; significantly above the median market projection of 8.8 billion which has been the average monthly borrowing for the past few years. This less-than-ideal data may not have a lasting impact on demand for the Pound, however, after the Office for National Statistics stated that the increase in August’s borrowing was due to a change in the usual pattern of income tax receipts. July is a month when a significant amount of income tax payments are due and as such there is normally a spillover of late payments into August.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3776.
EUR/GBP Exchange Rate Forecast to Edge Higher ahead of Eurozone Consumer Confidence
Since the Federal Open Market Committee (FOMC) opted to hold the lending rate, demand for the common currency has cooled significantly. This is due to speculation that the Fed’s delay will make it easier for other central banks to ease policy. With dwindling price pressures amid tanking commodity prices, many experts believe that the European Central Bank (ECB) will look to expand policy stimulus. ‘The dovish Fed delays but does not derail our call for parity in EUR/USD. We have revised our EUR/USD end-2015 projection to 1.05 from parity. Our projection still assumes the Fed will start hiking rates in December and the ECB will announce it will extend QE beyond September 2016,’ stated Bank of America Merrill Lynch analysts.
September’s Eurozone Consumer Confidence, due for publication later on Tuesday afternoon, has the potential to provoke changes for the common currency. However, a positive result may not be too impactful with so many traders betting that the ECB will ease policy within the next few months.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3768 during Tuesday’s European session.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Losses ahead of Eurozone Confidence Report
With September’s Eurozone Consumer Confidence report due for publication later on Tuesday, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely hold losses until the report is released. Unless the data is particularly surprising, however, the GBP/EUR exchange rate is likely to continue trending in a weak position with markets comparatively subdued after last week’s packed economic docket.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3894 during Tuesday’s European session.