UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a limited range on Wednesday morning. UK Government Borrowing data produced mixed results with new debt falling but the amount of money financed to the government rising. The Euro, meanwhile, edged higher versus its major peers despite a lack of influential domestic data. The appreciation can be attributed to ongoing speculation that the European Central Bank (ECB) will avoid expanding quantitative easing on Thursday.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3616.
Yesterday…
GBP/EUR Conversion Rate Predicted to Trend around 1.36 after UK Steel Industry Layoffs Weigh on Sterling
The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.2% on Tuesday afternoon.
An estimated 1 in 6 UK steel industry workers will likely lose their jobs in the coming month after a tide of cheap steel being dumped on the global market by China has caused many layoffs and closures. The closure of Cambuslang and Motherwell steelworks in Scotland has effectively ended 143 years of steel making in the country. The result of the huge job losses and drop in exports has weighed on the British asset. With a complete absence of British economic data to drive changes, the Pound is likely to hold a weak position versus its currency rivals.
‘I’ve seen difficult times before but never for the particular reason we have now,’ said Peter Fish, the managing director of the Sheffield-based steel consultancy Meps. ‘The big problem is export prices, because the Chinese are driving them. It’s specifically the quantity of imports to the UK and the fact they are very cheap. I hope we have reached the low point of diminishing returns and the squeeze on prices eases. But if the pressure keeps coming and the price gets squeezed, that is when people close their factories.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3624.
EUR/GBP Exchange Rate Forecast to Edge Higher despite Weak German Producer Prices
In spite of the fact that September’s German Producer Prices declined by -2.1% on the year, and -0.4% on the month, the shared currency advanced versus its major peers. Even the narrowing of the Eurozone current account surplus in August had minimal impact on the single currency. This is due to the general consensus that the European Central Bank (ECB) will avoid expanding quantitative easing on Thursday after it transpired that Eurozone banks had loosened their lending standards more than expected over the last few months.
‘This latest release (of the lending survey) should give the ECB’s Governing Council a little more breathing space as it continues to assess the broader recovery picture,’ said Timo del Carpio, an economist at RBC Capital Markets. However, many economists agree that ECB President Mario Draghi will talk down the Euro in the hopes of provoking devaluation, with the recent 10 cent surge against the US Dollar weighing on trade.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3583 during Tuesday’s European session.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Losses ahead of ECB Rate Decision
Given that so many analysts are convinced that the most recent Eurozone lending survey is a sign that the ECB will hold off from easing monetary policy, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold losses ahead of the rate decision. With that being said, the likelihood that Draghi will attempt to talk down the Euro should see single currency losses in the immediate aftermath of the rate decision and accompanying speech.
There is the possibility for GBP/EUR fluctuations on Wednesday with the release of British government spending data. This will be of particular interest domestically given the growing tensions between the Labour Party and the Conservative Party after Jeremy Corbyn was elected head of the former. Should the data show increased government spending it will give fodder to Corbyn who is adamant austerity doesn’t work.
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced to a high of 1.3673 during Tuesday’s European session.
