The Euro to Pound (EUR/GBP) exchange rate climbed to its best level in 3-weeks as UK house price data added to Sterling’s woes and against the US Dollar (EUR/USD) the single currency firmed on softer than forecast US Jobless Claims data.
Wednesday saw the Euro advance to its best level in a week against the Pound after the Bank of England (BoE) warned that the UK’s inflation rate will remain below its target of 2% until 2016 and said that inflation could fall below 1% over the coming months as weakness in the Eurozone puts pressure on prices.
On Thursday, the Pound weakened further to slide to a 3-week low after a report released by the Royal Institution of Chartered Surveyors showed that UK house price growth fell sharply in the three months to October. The data eases pressure on the BoE to raise interest rates.
Against the US Dollar, the Euro made gains after New York Federal Reserve Bank President William C Dudley urged investors to be patient on the timing of a US interest rate rise. The comments caused the ‘Greenback’ to soften against the Euro.
‘With inflation running low and the labour market still healing, it still is premature to begin to raise interest rates. All that said, I hope the economic outlook evolves so that it will be appropriate to begin to raise interest rates sometime next year,’ Dudley said in a speech in Abu Dhabi.
Also weighing on the US currency was the release of data, which showed that the number of Americans filing for unemployment benefits increased more than forecast last week.
According to the Washington based Labour Department, the number of people applying for benefits in the week ending November 8 increased by 12,000 to a seasonally adjusted 290,000. Economists had been expecting a rise of 4,000.
The Euro was also finding support from data released earlier in the session, which showed that Inflation in Germany and Spain remained stable and increased more than expected in France.
The data countered some of the negativity from a separate report, which showed that economists cut their growth and inflation forecasts for the currency bloc.
A group of 61 economists told the bank that they have downgraded their inflation expectations for 2015 from 1.2% to 1% and from 1.5% to 1.4% for 2016.
Their growth prediction has been trimmed from 1.5% to 1.2% too, with the ongoing turmoil in Ukraine and falling oil prices having a detrimental impact on GDP.
Euro Exchange Rate Forecast: Ukraine Could Soften Single Currency
The Euro is likely to ease over the coming days as attention returns to Ukraine and rising tensions between the west and Russia.
If the EU decides to impose a fresh round of sanctions against Russia then we expect the Euro to weaken against the US Dollar and perhaps the Pound.
On Friday the Euro continued to strengthen against the Pound as Eurozone GDP data came in better than forecast. Against the US Dollar the Euro softened as economists turned their attention to the latest US retail sales data.
Euro Exchange Rate News:
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