Pound Euro exchange rates extended losses on Thursday as investors responded to the European Central Bank’s (ECB) decision to leave policy unaltered. With no interest rate cuts or changes to quantitative easing the Euro broadly rallied, driving GBP EUR to a low of 1.1766.
- Pound Euro Exchange Rates Down from 1.20 – GBP/EUR falls from multi-week high
- Euro Strengthened Slightly by Retail PMIs – While Q2 growth figures meet flash scores
- NIESR’s August UK GDP Estimate Published – Unchanged from previous publication
- Update: No ECB Action – Euro (EUR) gains as policy remains unchanged
- Forecast: UK Deficit Figures Ahead – Impressive July trade figures could boost Pound
Pound Euro Exchange Rates Have Limited Recovery Opportunity on Friday
The Pound to Euro exchange rate hovered around the key level of 1.18 on Thursday afternoon after briefly dipping below towards 1.17, as the Euro held its ground following the European Central Bank’s (ECB) meeting and following press conference from ECB President Mario Draghi.
Sterling has a limited opportunity to recover from it worst levels vs the Euro on Friday, if upcoming trade balance figures impress investors.
There has been regular speculation about how the low value of the Pound since the Brexit vote could affect export and import figures. If the Pound’s value causes the deficit to lighten much further than expected, this could add a small bright side to Britain’s otherwise gloomy July ecostats.
However, it is unlikely that GBP/EUR will recover to around the week’s opening levels due to the pair having lost around two cents already. As such, it is likely GBP/EUR will end the week lower.
(Previously updated 14:52 BST 08/09/2016)
ECB Leaves Stimulus Unchanged, Pound Euro Exchange Rate Losses Continue
After hitting a multi-week high of 1.20 earlier in the week, the Pound Euro exchange rate fell back to trending in the region of 1.18 ahead of the European Central Bank’s (ECB) interest rate decision. The GBP/EUR currency pair weakened as investors responded to less-than-impressive UK housing data and below forecast manufacturing production stats.
These losses continued after the ECB decided to leave policy unchanged.
According to The Financial Times: ‘Despite widespread expectations that low inflation will eventually force the ECB to extend its quantitative easing programme into the second half of next year — and that the bank may also have to relax rules for buying bonds — Mario Draghi, president, said the ECB had not discussed extending QE.’
(Previously updated 08:00 08/09/2016)
GBP EUR Exchange Rate Poised to Recover Gains on Dovish ECB
Commentary from Bank of England (BoE) officials outlining the likelihood of further interest rate cuts also contributed to the Pound’s decline against the common currency.
However, the Pound Euro exchange rate could advance if the European Central Bank adopts a dovish tone in today’s policy gathering.
Any hints that the ECB is also considering adopting additional easing could send the Euro spiraling lower.
Thursday’s RICS House Price Balance report had little impact on Sterling despite improving from 5% to 12% rather than falling to 2% as expected.
The next UK data isn’t due for publication until Friday, when domestic trade balance and construction output figures will be released.
(Previously updated 07/09/2016)
Pound Euro exchange rates continued edging higher on Tuesday after Monday’s boost on UK data. Sterling sentiment remained strong, allowing GBP/EUR to fluctuate near its best levels – although the Pound’s advances slowed as the Euro strengthened.
Pound Euro Exchange Rates Lower Ahead of ECB Meeting
The Pound to Euro exchange rate lost a lot of its steady weekly advances on Wednesday, as sentiment from Britain’s previous optimistic economic figures faded.
Disappointingly low house price reports from Halifax for August as well as a surprising -0.9% contraction in July’s Manufacturing Production were amongs the factors weakening the Pound on Wednesday.
Markets took a more reluctant stance on buying up the Pound following a series of comments made by Bank of England (BoE) officials, including Governor Mark Carney.
Carney stated that the bank’s August stimulus measures had thus far been validated by the movement of the economy, reminding interviewers that the bank had forecast an activity uptick like the one we’re seeing in August data.
The Euro, on the other hand, strengthened on Wednesday afternoon as investors re-adjusted their positions ahead of Thursday’s European Central Bank (ECB) policy decision meeting.
There has been speculation that the bank will hint at extending its current stimulus measures, but analysts currently do not expect any further easing to be introduced at this week’s meeting.
(Previously updated 9:04 BST 07/09/2016)
GBP/EUR is on track to make a slight, steady advance this week having gained almost half a cent since the week’s opening levels of 1.1915. The pair briefly sank to a weekly low of 1.1897 on Monday but has generally remained above the key level of 1.19, and trended around 1.1960 on Tuesday afternoon. Can the Pound breach technical support at 1.20 and continue its recent run of gains against the common currency?
The morning’s disappointing German Industrial Production report had little impact on Pound Euro trading as UK Halifax House Price data also fell short of forecasts.
German Industrial Production fell by -1.5% on the month in July, disappointing hopes of a 0.1% increase.
On the year, production slid -1.2% rather than increasing 0.2%. There was some good news however as June’s numbers were positively revised.
However, with UK Industrial and Manufacturing Production figures ahead, the GBP EUR exchange rate has the potential to firm on surprisingly upbeat results.
Pound (GBP) Exchange Rates Hold Ground Thanks to Monday’s PMIs
Despite a lack of influential UK data on Tuesday, the Pound was generally able to hold its ground against most major currencies as sentiment towards GBP remained solid following Monday’s impressive Services PMI results.
Markit published its report of Britain’s August Service sector performance on Monday, which beat expectations by scoring a solid 52.9, following up from July’s Brexit-vote influenced contraction of 47.4.
This pulled August’s Composite PMI up from 47.5 to 53.6, which not only caused bets of further Bank of England (BoE) stimulus to fall slightly but also caused markets to rethink their positions on the Pound.
According to a Tuesday report from Bloomberg, Sterling bears that had previously bought a record amount of ‘short-positions’ on the currency have begun to rethink this strategy;
‘Deutsche Bank AG has exited a bet for the UK currency to fall on a trade-weighted basis, while retaining its longer-term negative view. UniCredit SpA said it had closed a short pound-dollar position, or a wager sterling would weaken, to reduce “tactical” risk.’
This reflects an overall firmer stance on the Pound following the volatility the currency has experienced in recent months.
Even this week’s fluctuations are relatively flat, but Sterling has been unable to advance much further than this since the Brexit vote due to key levels of psychological resistance, sometimes causing wider fluctuations.
Euro (EUR) Sturdy as Q2 Eurozone Growth Meets Preliminary Scores
The Euro finally found a more solid footing on Tuesday thanks to a handful of slightly influential datasets which performed generally solidly.
While Euro movement itself was mixed on Tuesday, the currency was able to hold its ground a lot better than it had done on Monday or for much of last week.
Eurozone retail PMIs from Markit were generally optimistic, with German retail sales jumping from 52 in July to 54.1 in August. This helped boost the overall Eurozone retail PMI from contraction of 48.9 to growth of 51.
Following a week of disappointing August PMIs in all other major sectors, this report was a breath of fresh air for the Euro.
Eurozone Q2 Gross Domestic Product (GDP) was also slightly relieving for markets, meeting preliminary scores of 0.3% quarter-on-quarter and 1.6% year-on-year.
Unfortunately, this meant that Eurozone growth was slower in Q2 than Q1, preventing the Euro from making a more solid Tuesday recovery. The Financial Times reported;
‘Eurozone GDP growth slowed between April and June as major economies such as France and Italy stalled, official data have confirmed.
GDP growth came in at just 0.3 per cent for the second quarter, confirming an initial estimate published in July. This compared to growth of 0.5 per cent in the first three months of the year.’
Pound Euro Exchange Rates Forecast to Advance if Wednesday’s NIESR Estimate Impresses
The Pound and Euro could see a little more direction on Wednesday after Tuesday’s relatively limp session if Wednesday’s key ecostats inspire markets.
While the day is relatively light on Eurozone data, with only German industrial production data for July due for publication, the Pound is highly likely to drive movement, especially in the afternoon.
Wednesday morning’s UK datasets include industrial and manufacturing production results from July, which could support Sterling’s current run if they beat expectations despite July’s Brexit-influenced downtick.
Wednesday afternoon will see a speech held by some Bank of England (BoE) officials in London, including Governor Mark Carney. If policymakers indicate how August data has affected Britain’s economic outlook, this could be vital for the week’s Sterling movement.
Perhaps even more vital will be NIESR’s August Gross Domestic Product (GDP) estimate for August.
If NIESR predicts that Britain’s economy will grow by more than 0.1% in August, Sterling demand could strengthen once more and could even take Pound Euro exchange rates beyond the key resistance level of 1.20.
