- Euro fluctuated against Pound on Eurozone news – Confidence plummeted in July
- ECB failed to resolve investor concerns – ‘Wait and see’ from central bank
- Pound made rollercoaster movement – Ended last week low after two days of poor data
- Mass of Eurozone data due this week – UK to bring Q2 growth figures
Euro Pound Exchange Rate Dips on Monday
The Euro Pound exchange rate edged slightly lower on Monday despite German data printing more strongly-than-forecast as another terror attack in Germany weighed on sentiment.
The German IFO Business Climate, Current Assessment and Expectations measures for July all came in more strongly than anticipated, but the figures had little impact on the Euro.
Today’s only UK data, the CBI Trends Total Orders, Trends Selling Prices and Business Optimism results are unlikely to have much of an impact on EUR GBP exchange rate trading.
Trends Total Orders are expected to fall from -2 to -6 in July, while Business Optimism slumped from -5 to -15.
The Euro Pound exchange rate is currently trending in the region of 0.8353 while the Pound Sterling to Euro (GBP/EUR) exchange rate trends in the region of 1.1971, up 0.3% on the day’s opening levels.
The next UK data with the potential of inspiring EUR/GBP exchange rate movement is the UK’s BBA Loans for House Purchase report. The figure for June is forecast to have fallen from 42187 to 39650.
(Previously updated 24/07/2016)
The previous week saw the Euro fluctuate wildly, with confidence falling and the ECB doing little to reassure investors.
The Pound made similarly violent movements, rising initially on Bank of England (BoE) news but ending on a low note, due to the impacts of ‘Brexit’ making themselves strongly apparent.
Eurozone Economic News: Euro Rocked by Waning Confidence and ECB Indecision
The value of the Euro has been extremely sporadic over the past week, with dramatic movements coming due to a steady stream of high-impact domestic data that has had contradictory impacts on the single currency.
Opening off the week was exceptionally poor confidence data for Germany and the Eurozone, which fell in July in the provided ZEW surveys.
This draining of confidence after the EU Referendum vote was confirmed on Wednesday, when the July consumer confidence flash fell from -7.2 to -7.9.
Thursday brought the most notable Eurozone announcement of the week, which was the first European Central Bank (ECB) interest rate decision since the ‘Brexit’ vote.
Although some had expected an interest rate cut, the reality saw a rate freeze at 0% and an unsatisfactory tone of ‘wait and see’ from ECB President Mario Draghi. As such, the prevailing opinion after Thursday was that a rate cut was a probability for September.
The week closed on a somewhat optimistic note, as despite the earlier slide in confidence, many of the July flash PMIs for Eurozone services, manufacturing and the composite field increased in value.
Pound Damaged Overall by Falling Pre-‘Brexit’ Sales and Post-Referendum PMIs
The movements of the Pound have been wildly varied over the past week, on account of greatly differing reactions to how the EU Referendum result may have affected the UK’s economic chances.
The first shift seen in the Pound came on Monday, when as a direct counterpoint to the previous Friday’s dovishness from BoE official Andy Haldane, another BoE official, Martin Weale, made comments that went against the idea of implementing an August interest rate cut.
This boosted the Pound at the start of the week, although Tuesday’s mixed inflation rate results for June saw a more levelled reaction from investors in the UK currency.
Wednesday brought another jump to the value of the Pound, when May’s unemployment rate fell from 5% to -4.9% and claims in June also dropped off.
Thursday was far less positive; retail sales in June fell in all fields, which sparked serious concerns about how the post-Referendum results would turn out.
Friday continued this stream of negativity, when the Markit/CIPS composite, manufacturing and services PMIs for July all fell into negative ranges.
In response to this gloomy close to the week, the Guardian’s Larry Elliot pointed out that:
‘The abrupt and large fall in both orders and output reported by HIS, Markit and the CIPS clearly makes a recession in the second half of 2016 a real risk. Similar results for August and September would suggest a 0.4% contraction in the economy in the third quarter. It only takes two successive quarters of contraction to constitute a technical recession’.
Future EUR, GBP Forecast: Range of German Data and UK GDP due This Week
The coming week will bring a swathe of ecostats from the Eurozone, as well as a less-broad but still-impactful number of contributions from the UK.
In the former case, Germany will make up a major contributor, with IFO surveys for July coming on Monday, the GfK consumer confidence result for August coming on Wednesday and Germany’s unemployment and inflation rate stats for July coming on Thursday.
Respectively, estimates have been for a decline in confidence, a drop in the number of unemployed and a rise in preliminary inflation.
The UK’s less-encompassing contributions will be made up of decline-forecast GDP growth rate results for the second quarter on Wednesday, along with a drop-predicted GfK consumer confidence result for July on Friday.
Recent EUR, GBP Exchange Rates
The Euro Pound (EUR GBP) exchange rate has been trending in the region of 0.8399 and the Pound Euro (GBP EUR) exchange rate has been trending in the region of 1.1906 recently.
