The Euro to Pound Sterling (EUR/GBP) exchange rate was experiencing mixed trading as the UK currency found support. The Euro to US Dollar (EUR/USD) exchange rate meanwhile edged higher as it found support from data showing that business confidence in Germany improved in November.
Earlier in the session, the Euro had been firmer against the Pound on the back of the German data but the UK currency fought back as speculation increased that it will find support from interest rates, which will be comparatively higher than those found in the Eurozone and Japan.
Some economists are forecasting that the Pound will make further gains against the
‘The policy divergence trade is still very much a strong force even as UK data has been slightly more mediocre than previously. Sterling will outperform against all the others including the Yen and the Euro which are being pulled down by prospects of new stimulus measures,’ said Neil Jones from Mizuho Bank.
Data out of the Eurozone’s largest economy, Germany, supported the single currency as it took economists by surprise. According to the Ifo institutes business climate index, sentiment improved to 104.7 from 103.2 in November.
The positive data saw the Euro firm against the US Dollar and several other peers. Despite coming in positively some economists were not convinced by the data.
‘We see some stabilization but I don’t see any reason for enthusiasm. Well-known risks to the economy such as the crisis in the Ukraine haven’t really receded,’ said a fixed income strategist at Stuttgart based Landesbank Baden-Wuerttemberg.
Despite the positive German data the Euro remains under pressure from rising expectations that the European Central Bank (ECB) is edging closer to introducing quantitative easing measures in order to spur weak growth and try to tackle the threat posed by weak inflation.
Last Friday ECB President Mario Draghi warned that inflation expectations across the currency bloc are heading towards dangerously low levels and reaffirmed that the ECB is ready to expand upon its current stimulus programmes in order to boost inflation.
Looking ahead to the rest of the session, The Euro could weaken against the US Dollar if the latest Markit Services and Composite Purchasing Managers Index (PMI) data comes in positively. A strong set of figures will likely support speculation that the Federal Reserve is edging closer to raising interest rates.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
Euro,
Euro,
Euro,
[/table]
