Euro to Pound Exchange Rate Slides despite Signs of Strength in Eurozone Inflation Figures
Despite this morning’s key Eurozone ecostats coming in slightly higher than expected in some notable prints, the Euro to Pound Sterling (EUR/GBP) exchange rate has been sliding from its best levels in months this morning.
Due to broad weakness in the Pound (GBP) on Brexit jitters, as well as Federal Reserve dovishness, the Euro (EUR) has seen a jump in demand this week.
EUR/GBP opened the week at the level of 0.8960, and has since gained almost a third of a cent.
While EUR/GBP currently trends near the level of 0.8985, it has already fallen back from the impressive highs seen yesterday.
EUR/GBP touched on its best levels since January, 0.9006, during Wednesday’s session, and since then has been sliding back from those best levels in a mixture of profit-taking and reassuring words from Bank of England (BoE) officials.
Euro (EUR) Exchange Rates Struggle to Hold Best Levels despite some Higher Inflation Stats
Demand for the Euro weakened this morning, as investors sold the shared currency back from its best levels in a mixture of profit-taking and concern about the Eurozone’s economic outlook.
While the shared currency’s losses may have been slowed by this morning’s German and French inflation data, which beat expectations in some notable prints, the data ultimately wasn’t enough to keep the Euro nearer its best levels.
German inflation came in at 1.6% overall year-on-year in June, as projected.
However, the harmonised yearly figure unexpectedly printed at a better than projected 1.5%. Similarly, the harmonised monthly rate came in at 0.3% rather than the expected 0.1%.
Overall though, data has offered the Eurozone’s economic outlook a little relief, but has not been enough to douse fears that the Eurozone economy is still performing too slowly.
As a result, markets continue to speculate over European Central Bank (ECB) monetary policy easing, which is keeping the Euro under pressure.
Pound (GBP) Exchange Rates Resilient on Bank of England (BoE) Governor Comments
While concerns about a possible interest rate cut from the Bank of England (BoE) persist, fresh comments from Bank of England Governor Mark Carney did offer the Pound a little support today.
Carney continued to warn that a no-deal Brexit or a global trade war would be bad for Britain’s economy and businesses, but he also said that Britain’s financial system was ready for the possibilities.
The Bank of England said it believed that Britain’s banking system would survive a no-deal Brexit and trade war. This confidence from the bank kept the Pound from falling further.
According to the bank’s Financial Policy Committee:
‘The perceived likelihood of a no-deal Brexit has increased since the start of the year,
The UK banking system remains strong enough to continue to lend through the wide range of UK economic and financial shocks that could be associated with Brexit.’
Of course, with no-deal Brexit fears still rising, the Pound’s resilience on this news was highly limited too.
Euro to Pound (EUR/GBP) Exchange Rate to be driven by European Central Bank (ECB) Speculation
As the Euro to Pound (EUR/GBP) exchange rate falls from its best levels today, the Euro may be vulnerable to even further losses if European Central Bank (ECB) easing speculation continues to worsen.
Concerns are rising that the ECB could introduce further easing into its Eurozone monetary policy unless there are more solid signs of recovery in Eurozone data.
As a result, investors are anticipating tomorrow’s German wholesale prices and Eurozone industrial production stats, which could further drive ECB speculation.
If Eurozone industrial production remained weak in May or even falls short of expectations, the Euro could weaken further as ECB interest rate cut bets may rise.
Demand for the Pound, on the other hand, will be driven more by any further late-week developments from the Bank of England (BoE).
Any surprising UK political or Brexit developments could also cause some Euro to Pound (EUR/GBP) exchange rate movement.