As traders await the European Central Bank (ECB) Rate Decision the EUR/GBP exchange rate has turned bearish thanks to the release of a strong UK Retail Sales result.
Pound (GBP) Currency News: UK Public Sector Net Borrowing Weighed on Pairing
Wednesday continued the trend of volatility that has marked the Euro to Pound Sterling (EUR/GBP) exchange rate this week, with the pair rallying strongly before entering a slump on the back of the UK Public Sector Net Borrowing figure. Government borrowing was shown to have narrowed to 8.6 billion Pounds (GBP), a reassuring result after the unexpectedly high level of spending evidenced in August’s figure. Indicating that the domestic economy continues to strengthen even in the face of wider global slowdown pressures, this saw demand for Sterling spike. While the EUR/GBP conversion rate retreated to 0.7340 in response to the strong data the pairing soon began to recover ground thanks to the dovish influence of recent job losses in the UK steel industry on the Pound.
UK Retail Sales Bullish for Pound (GBP) Today, Euro (EUR) Awaits European Central Bank (ECB) Rate Decision News
Sentiment towards the common currency (EUR) has, however, turned more bearish on Thursday morning as European Central Bank (ECB) policymakers meet in Malta to discuss monetary policy. While the expectation is for the upcoming ECB Rate Decision to show no change in interest rates, traders are anticipating that President Mario Draghi will attempt to talk down the single currency. As the central bank is still thought to be reluctant to engage in fresh monetary loosening measures and is inclined to hold off on further economic stimulus in the near-term, the impact of any stated dovishness is likely to be limited. Thus, barring any unexpected policy changes, this is unlikely to particularly hold back the Euro ahead of the weekend.
Comments from Bank of England (BoE) Governor Mark Carney made on Wednesday have also been having a positive influence on the Pound today. Addressing the prospect of a ‘Brexit’ Carney stressed the financial benefits that the UK has experienced from European Union membership, adding strength to the Pro-EU campaign and somewhat alleviating trader fears. As UK Retail Sales in September bettered expectations, rising by 5.9% rather than 4.6%, this has set Sterling on a strong bullish run across the board this morning.
EUR/GBP Exchange Rate Forecast: Euro may Soften on Upcoming Eurozone Services and German Manufacturing PMIs
The Eurozone Consumer Confidence Index for October will also print this afternoon, with the figure forecast to see a slight decline on the month from -7.1 to -7.4. Should confidence indeed weaken, the common currency could extend its losses today as poor consumer outlook continues to suggest a more persistent economic weakness. Tomorrow’s Eurozone Services and German Manufacturing PMIs may further damage the appeal of the Euro, with expectations pointing to a general downturn in production.
Current EUR, GBP Exchange Rates
At time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was slumping around 0.7305, while the Pound Sterling to Euro (GBP/EUR) pairing was making gains in the region of 1.3698.