Euro to Pound Exchange Rate Floundering as Investors Unwind Bets against Sterling
Tuesday’s stronger than expected Eurozone data wasn’t enough to keep the Euro to Pound Sterling (EUR/GBP) exchange rate climbing, as the Pound (GBP) remained generally appealing while investors unwound bets against it.
Since last week, hopes that a softer Brexit was still possible have led to a big Pound recovery. EUR/GBP fell over a pence last week and closed at the level of 0.8860.
This week, the Euro (EUR) has attempted to rebound but has been unable as investors are hesitant to sell Sterling too far for now.
While EUR/GBP has avoided last night’s three month low of 0.8844, the pair has only rebounded slightly and still trends low near the level of 0.8864.
Euro (EUR) Exchange Rates Unappealing despite Signs of Improvement in Eurozone Sentiment
The Euro has remained largely unappealing overall this week, as markets are still anxious about the possibility of Germany being in recession. Signs of optimism in yesterday’s Eurozone data were not enough to boost the shared currency against a stronger Pound.
Tuesday saw the publication of ZEW’s September economic sentiment index results. While Germany’s current conditions print was even weaker than expected, the outlooks were actually less dire than predicted.
German economic sentiment lightened to -22.5 and the overall Eurozone’s sentiment index lightened from -43.6 to -22.4.
Still, continued concern about the overall health of Germany’s economy, as well as uncertainty over the European Central Bank’s (ECB) latest monetary policy plans limited demand for the Euro.
Pound (GBP) Exchange Rates Sturdy as Investors Hope to Avoid Missing another Rally
Speculation that the Pound could continue a rally that started at the end of last week has kept investors from selling the British currency much so far this week.
Sterling has been highly volatile, as on Monday it briefly shed some of Friday’s gains, but rebounded and climbed again on Tuesday afternoon.
Analysts have said that the main question for the Pound outlook was whether no-deal Brexit was really off the table or not.
UK Prime Minister Boris Johnson has insisted that while he will not break the law, Britain will be exiting the EU on the 31st of October with or without a deal.
This, as well as warnings from EU officials that no-deal Brexit was a serious risk, kept no-deal Brexit fears on the table, keeping a lid on the Pound’s potential for gains.
Euro to Pound (EUR/GBP) Exchange Rate Awaits Central Bank Speculation and News
While developments in UK politics and Brexit will remain the primary influence for Pound movement, expected central bank news and likely speculation will be highly influential for the Pound to Euro (GBP/EUR) exchange rate over the coming days.
This evening’s Federal Reserve policy decision could cause some Euro movement if it surprises investors, due to the Euro’s negative correlation with the US Dollar (USD).
It will be followed by the Bank of England’s (BoE) own September policy decision tomorrow.
The BoE is not expected to show any notable shifts in tone, but if its stances have been shifted at all by data or Brexit news then the Pound could of course see some reaction.
European Central Bank (ECB) speculation could influence the Euro’s movement as well, depending on today’s upcoming inflation rate stats. Overall, central bank and Brexit news is likely to influence the Euro to Pound (EUR/GBP) exchange rate.