The Euro to Pound (EUR/GBP) exchange rate firmed on Tuesday as Bank of England Governor Mark Carney delivered a dovish testimony to lawmakers. The Euro to US Dollar (EUR/USD) exchange rate however softened ahead of US GDP and Consumer Confidence data.
Sterling gave up earlier gains against the Euro and other major peers after BoE Governor Mark Carney warned that the UK faces heightened risks from external factors and reaffirmed his concern that inflation in the nation could fall below 1% over the next six months.
Carney and other BoE policy makers testifying to politicians in Westminster said that they see the greatest risks to the UK economy will come from slowing global growth and in particular the weakness of the European and Japanese economies.
‘Certainly in recent months, the global economic conditions have deteriorated in two of the major economies, Europe and Japan. The geopolitical situation remains difficult and the combination of that suggests a heightened degree of external risk to the United Kingdom,’ said Carney.
The dovish comments came as the Paris based Organisation for Economic Cooperation and Development (OECD) said that the global economy continues to ‘run in a low gear’. The organization forecast global growth to come in at 3.25% this year, followed by a 3.75% rise next year and just under 4% in 2016.
The OECD urged Eurozone members to invest more in infrastructure and move away from austerity in order to bolster growth in the region.
‘Renewed fiscal austerity could downshift the pace of recovery rather than help it,’ said OECD Chief Economist Catherine Mann.
The Euro found support earlier in the session after data out of France showed that business confidence increased unexpectedly in November. The business confidence index rose from October’s reading of 98 to 99 in November. Confidence in the service sector also improved in November. The corresponding index came in at 94, up from 93 in October. The overall business confidence index for all sectors climbed to 94 in November from 91 in October.
Against the US Dollar, the Euro remained softer as the ‘Greenback’ continued to find support from last week’s Federal Reserve minutes which showed that the policy makers believe that the US economy is now strong enough to withstand external threats. The divergence of the Federal Reserve’s monetary policy to that of the Eurozone and other major economies also offered support to the US currency.
The US Dollar could make further gains later in the session if the latest US GDP and Consumer Confidence data comes in strongly
Euro Exchange Rate News:
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