Update
On Wednesday morning the Euro to Pound Sterling (EUR/GBP) exchange rate was trending within a limited range despite that fact that British labour market data erred towards negativity. Although wage growth failed to meet with expectations and Jobless Claims Change eclipsed the market consensus, Unemployment Rate saw a positive drop from 5.5% to 5.4%.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7092.
Yesterday…
USD Overvaluation Weighs on EUR/GBP Conversion Rate
Following on from last Friday’s surprisingly positive US Non-Farm Payrolls result the US Dollar continues to hold a position of strength versus its major peers. This is despite the ‘Greenback’ (USD) downtrend seen yesterday amid overvaluation concerns and trader profit-taking. One of the symptoms of comparative USD strength is Euro weakness thanks to negative correlation. As a result, the Euro to Pound Sterling (EUR/GBP) exchange rate is made softer by a bullish US asset.
It is fair to say, however, that traders are showing concern regarding USD overvaluation and the potential drag it will have on domestic growth. With that in mind there is the chance for a short-term Euro uptrend if traders attempt to readjust Dollar positions.
The Euro to Pound Sterling (EUR/GBP) exchange rate declined by around -0.7% on Tuesday afternoon.
Forex News: Weak Chinese Inflation sees Subdued Market Trade, GBP/USD Trending within a Tight Range
During the Asian session disappointing Chinese inflation data provoked fears regarding a global economic slowdown. On the year, October’s Chinese Consumer Price Index dropped from 1.6% to 1.3% despite predictions of a smaller drop to 1.5%. On a monthly basis, October’s Consumer Prices dropped from 0.1% to -0.3%; eclipsing the median market forecast fall to -0.2%.
This data suggests that global economic conditions may not support tighter policy from the US and the UK, causing subdued market trade today amid mounting uncertainties regarding the reaction from the People’s Bank of China (PBoC). ‘The moderation of CPI has definitely opened up room for the PBOC to ease further,’ said Zhu Qibing, a Beijing-based analyst at China Minzu Securities Co. ‘But this year, the effectiveness of monetary policy in boosting demand has been limited. So even if the central bank has room, it may not cut interest rates again until next year.’
Cool British Retail Sales sees EUR/GBP Conversion Rate Trending Statically Today
In response to less-than-ideal domestic retail sales data, the British Pound edged lower versus its major peers. The depreciation has been fractional, however, with the weak Chinese inflation data causing subdued market trade. October’s BRC Like-for-Like Sales saw annual retail sales contract by -0.2% despite expectations of 0.8% growth. ‘October was a somewhat disappointing month overall for retailers,’ BRC chief executive, Helen Dickinson, said.
‘A number of categories which we would typically expect to be popular on Black Friday saw a slowdown in October, suggesting that some shoppers may be holding out in the hope of some great deals at the end of November.’
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7071.
Euro to Pound Sterling Exchange Rate Holds Steady despite Soft Italian Industrial Production
Although there was a distinct lack of influential, market-moving European data today the few reports remaining produced a mixed-bag of results. On the year, September’s French Industrial Production rose by 0.7%; eclipsing the market consensus of 0.48% growth. On a monthly basis, French Industrial Production also bettered estimates. However, Italian Industrial Production was less desirable in September having failed to meet with expectations on both a monthly and an annual basis.
The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low of 0.7065 today.
Greek Geopolitical Tensions Bubble under the Surface, Euro to Hold Weak Position against the Pound and US Dollar
Greek geopolitical uncertainties have started to creep back into investor focus after creditors refused Greece’s next bailout cash injection without first implementing more reforms. Over the summer Greek authorities were forced to submit to harsh austerity measures in order to secure a massive €86 billion bailout. According to creditors, these reforms have not yet been fully implemented.
‘The €2bn will only be paid out once the institutions give the green light and say that all agreed actions have been carried out and have been implemented. That still has not happened,’ stated Eurogroup President Jeroen Dijsselbloem.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Hold Steady on Subdued Market Trade
Given that the markets have been particularly quiet in response to uncertainties regarding the true health of China’s economy, there is a high potential that the Euro to Pound Sterling (EUR/GBP) exchange rate will hold steady for the remainder of Tuesday’s European session. With that being said, however, there is the potential for movement in response to September’s US Wholesale Inventories data due for publication during the North American session.
In the long-term, however, most analysts predict that widening central bank policy divergence and the likelihood of a near-term Federal Reserve rate hike will cause the EUR/GBP exchange rate to soften considerably.
British Jobs Data to Provoke EUR/GBP Volatility Tomorrow
On Wednesday there will be a number of British data publications with the potential to spark EUR/GBP volatility. With an absence of influential European economic data once again, the single currency is likely to see changes in response to US Dollar movement and trader risk appetite.
Given that improving labour market conditions will pressurise the Bank of England (BoE) into hiking the cash rate sooner-than-anticipated, tomorrow’s data will be very likely to impact Sterling demand. Claimant Count Rate, Jobless Claims Change, Average Weekly Earnings, Weekly Earnings ex-Bonus, ILO Unemployment Rate and Employment Change will all be of interest to those invested in the British asset.
During Tuesday’s European session, the Euro to Pound Sterling (EUR/GBP) exchange rate reached a high of 0.7128.
