Despite all the justified negativity, surrounding the Eurozone economy the Euro (EUR) was able to make gains against the Pound (GBP) and US Dollar (USD) on Monday.
The currency strengthened not because of any positive economic data out of the region but instead made gains because of negative rhetoric by policy makers at the Bank of England and Federal Reserve.
Sterling softened after the Office for Budget Responsibility warned that tax revenue for the UK government is expected to be lower than expected due to many of the jobs being created after the recession being poorly paid. As a result, comments made earlier in the month by policy makers that the UK economy is not yet strong enough to warrant an interest rate hike found support.
Adding to the pressure on the Pound were comments made by Bank of England Governor Mark Carney who said that the Bank would consider the Eurozone’s weakness when it comes to deciding an interest rate rise.
‘The only difficulty that is caused by Europe is that it provides an additional drag on growth. However, that does not dictate the monetary policy of the Bank of England. The BoE had already forecast that Britain’s rapid recovery would slow slightly towards the end of 2014,’ said BoE governor Mark Carney.
With concerns already high regarding a global economic slowdown, traders were not convinced by the comments.
Pound to Euro Exchange Rate Forecast
With the US, Canadian and Japanese markets closed on Monday trade was fairly muted but what movement tend to be exacerbated. Things should return to normal on Tuesday and the GBP/EUR exchange rate will have a chance to regain lost ground. Economists will be closely watching inflation data due out of France for further signs of deflation in the Eurozone and Economic Sentiment Data out of Germany will be an indicator to the concerns over the German economy. The market will also focus on UK inflation data.
US Dollar to Euro Exchange Rate Forecast
The US Dollar was weaker against the single currency due to the closure of the US market for the Columbus Day national holiday. Over the weekend, the ‘Greenback’ was weakened by comments made by Federal Reserve Vice Chairman Stanley Fischer.
Fischer indicated that slower than expected overseas growth could cause the central bank to refrain from raising interest rates.
Euro Exchange Rate News:
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