UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.3% on Thursday morning.
With British Retail Sales data predicted to show slowing growth in August amid falling fuel and food costs, the Pound edged lower versus many of its major peers in the early stages of Thursday’s European session. Market volatility is somewhat subdued, however, with trader focus dominated by the Federal Open Market Committee (FOMC) interest rate decision due at 19:00 UK time.
Trader uncertainty regarding the direction the FOMC will take with regards to policy outlook has caused the Euro to strengthen versus many of its peers. Although a Fed rate hike would widen the policy divergence between the North American central bank and the European Central Bank (ECB), it would also increase demand for safe-haven assets. Market volatility is likely to remain comparatively subdued during Thursday’s European session.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3710.
Yesterday…
GBP/EUR Exchange Rate Predicted to Surge after Positive UK Jobs Data
The Pound Sterling to Euro (GBP/EUR) exchange rate rallied by around 1.0% on Wednesday afternoon.
The British Pound advanced on its major peers on Wednesday morning after British economic data produced mostly positive results. With the exception of Jobless Claims Change, which saw an unwanted 1,200 claimant increase in August, Average Weekly Earnings, Weekly Earnings ex Bonus, Unemployment Rate, Employment Change and Claimant Count Rate all bettered or equalled the respective median market projections.
Andy Scott, economist at HiFX, has explained why today’s data sent the Pound jumping this morning: ‘Average earnings rose at their fastest pace in six years in July, showing that the improving labour market is feeding increased wage demands – a sign that employers are willing to pay more to keep existing, or hire new workers. The news of individuals seeing strong pay growth in real terms should continue to support domestic demand and economic growth, all the more important when the global growth outlook is weakening. This also tallies with consumer confidence, which has recently been at a 15-year high, as people’s improving financial position boosts sentiment. Sterling rose more than half a percentage point against the Dollar to 1.54, and by the same against the Euro to 1.37 as the news supports those at the Bank of England who are signalling rates will need to rise ‘sooner rather than later.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3752.
EUR/GBP Conversion Rate Predicted to Hold Losses after Eurozone Inflation Dropped
In contrast to the Pound, the shared currency declined versus its major peers after inflation data failed to meet with expectations. On the year, August’s Eurozone Consumer Price Index dropped from 0.2% to 0.1%. The Core Eurozone Consumer Price Index declined from 1.0% to 0.9% in August. This lack of inflationary pressure further highlights the increased likelihood that the European Central Bank (ECB) will look to expand quantitative easing.
‘Inflation across the Eurozone unexpectedly weakened in August, a development likely to fuel speculation that the European Central Bank may have to expand its bond-buying program. There were more signs of easing inflationary pressure Wednesday, as Eurostat reported slowing growth in labour costs across the bloc. Eurozone labour costs, for every hour worked, rose 1.6% in the second quarter from the same period last year. Gross wages rose 1.9%, while non-wage costs were up 0.4% over this period. In the first quarter, labour costs had increased by 1.9%,’ stated Nina Adam reporting for the Wall Street Journal.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3578 during Wednesday’s European session.
British Pound to Euro (GBP/EUR) Conversion Rate Forecast to Hold Above 1.37
Given the absence of further data publications for both the UK and Europe, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold gains for the remainder of Wednesday’s European session. Thursday will see significant market volatility with the Federal Reserve interest rate decision dominating trader focus. European economic data will be somewhat thin on the ground tomorrow, but British Retail Sales are likely to impact on the GBP/EUR pairing.
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced to a high of 1.3758 during Wednesday’s European session.