Pound Sterling Regains Ground Against Euro as ECB Surprise Wears Off
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending up after yesterday’s Euro surge. The common currency was buoyed by the European Central Bank’s (ECB) decision to make only the smallest expected cut to the deposit rate. After plunging to a low of 1.3802 during yesterday’s London session, the GBP/EUR exchange rate is now rising 0.2%.
Earlier…
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently bullish ahead of today’s key interest rate decision by the European Central Bank (ECB), while interest rate decisions are also affecting the GBP/USD exchange rate, pushing it into negative territory.
Pound Sterling (GBP) Exchange Rate News: Today’s PMIs Print Positively, Pound Still Down Overall
After suffering previous weaknesses, two better-than-expected results from the Markit UK Composite and Services PMI’s haven’t been enough to lift Pound Sterling against the majority of currencies. The Composite index rose from 55.4 to 55.8, while the Services index increased one point to 55.9, but Pound Sterling remains -0.4% against the Australian Dollar (AUD), -0.3% against the Canadian Dollar (CAD) and the New Zealand Dollar (NZD) and -0.1% against the US Dollar (USD).
Despite its generally poor performance, Pound Sterling has been able to appreciate 0.4% against the Euro, as traders have little appetite for the common currency before today’s ECB decision. Little data is due out for the UK for the rest of the week, so GBP movement will be determined by the strength or weakness of other currencies.
Euro (EUR) Currency News: Morning PMIs Disappoint Ahead of Interest Rate Decision
Today’s Composite and Services Markit PMIs for Eurozone countries have mostly disappointed, with only the Italian and German Composite indexes performing better-than-expected, rising to 54.3 and 55.2 respectively. Italy’s Services index remained level, despite a forecast rise, while both PMIs for the Eurozone dropped slightly. The French PMIs both fell to the 51.0 mark, although in the wake of the Paris attacks this will come as little surprise to economists.
These low-impact releases are unlikely to change Euro fortunes much, as the dominant news for today will be the ECB’s decision on interest rates. Wednesday’s Consumer Price Index, which showed a drop in inflation during November, has all-but-guaranteed that the ECB will increase their stimulus measures. The decision will be announced at 12.45 GMT and an increase in monetary stimulus will see the Euro plummet in the short term.
The EUR/GBP exchange rate is currently trading around 0.7070.
US Dollar (USD) Bullish as Fed Chair Suggests Rate Hikes Ahead
While Tuesday’s surprising ISM Manufacturing index showed that the sector contracted in November, instead of experiencing a slower rate of growth than the previous month, Fed Chair Janet Yellen has indicated that she believes the US economy is ready for an interest rate hike.
The Federal Reserve had previously said that improvement in the job market was one of the key factors it would need to see before moving to increase interest rates. Yesterday’s ADP Employment Figures showed a better-than-anticipated increase in private sector hiring, with 27k more jobs created than forecast. The data is a strong indication that Friday’s important US Non-Farm Payrolls will print positively and tick a box for the Fed ahead of the December 15th-16th meeting.
While some members of the Federal Open Market Committee (FOMC) have expressed concerns that a rate hike would not be beneficial, Yellen is not concerned over a potential split in viewpoints, stating: ‘I don’t need unanimity. I think we have to tolerate some dissent. I wouldn’t try to stifle dissents, and I would even expect some at critical junctures.’
The ISM Manufacturing Composite is due out later today, as well as another public appearance by Fed Chair Janet Yellen.
The USD/GBP exchange rate is currently trending around 0.6698.
Current GBP, EUR, USD Exchange Rates
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading around 1.4136, while the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.4935.
The Euro to US Dollar (EUR/USD) exchange rate is currently 1.0562.
