- GBP EUR Exchange Rate Fluctuates near 1.10 – BoE meeting weakens GBP
- Euro Remains Sturdy – Due to Eurozone data and US Dollar weakness
- Bank of England (BoE) Meets – Sterling plummets on dovish tone
- EUR Forecast: Key German data next week – Inflation on Friday
Updated 16:32 BST 04/08/2017:
GBP EUR Exchange Rate Edges Away from Seven-Year-Low
Towards the end of the week’s European session, the Pound benefitted slightly from Euro weakness.
A rise in demand for the US Dollar (USD) due to strong US jobs data left the Euro weaker, helping the GBP EUR exchange rate to recover slightly.
Earlier in the day, GBP EUR hit a low of 1.1046. This was the worst level for the pair since 2010 – a seven-year-low.
While the pair did recover slightly, it remained within the low region of 1.10. It may recover next week if traders opt to buy the cheap and undervalued Pound from its lows.
[Previously updated 12:48 BST 04/08/2017:]
The Pound continued to see mostly flat trade on Friday morning, trending near its worst levels in over five years against the Euro.
At the time of updating the GBP EUR exchange rate trended in the region of 1.1067.
The morning’s Eurozone data had little notable effect on Euro exchange rates.
Germany’s June factory orders beat expectations and the German construction PMI from July advanced to 55.8. However, the Eurozone’s July retail PMI slipped from 53.2 to just 51.
[Previously updated 16:47 03/08/2017]
Bank of England (BoE) Leaves Rates Frozen and GBP EUR Exchange Rate Plummets
The GBP EUR exchange rate plummeted on Thursday afternoon, ending the week’s narrow trade trends.
Pound Euro quickly lost over half a cent in value as the bank revealed it had cut its UK growth outlook for 2017 and 2018, as well as its 2018 wage growth forecast.
By the end of Thursday’s European session, GBP EUR had hit a low of 1.1054.
This marked a new post-referendum low for the pair and the worst GBP EUR level since 2011.
As well as cutting its growth forecasts, BoE Governor Mark Carney issued new warnings on the potential negative affects of the Brexit process on Britain’s economy.
[Published 06:00 BST 03/08/2017]
After days of fluctuation, the GBP EUR exchange rate could see a big shift in movement on Thursday depending on the outcome of the day’s Bank of England (BoE) policy decision. Sterling could also be driven by the day’s anticipated UK services PMI.
GBP EUR began the week trading at around 1.1174 and has trended in a narrow range between 1.1145 and 1.1206 since then. On Wednesday afternoon the pair continued to trend closely to the week’s opening levels.
Pound (GBP) Limp as UK Construction Falls Short
This week’s UK ecostats haven’t been enough to boost the Pound against a sturdy Euro.
While Sterling benefitted briefly from the strong UK manufacturing PMI earlier in the week, it was unable to sustain any gains and still trends near the week’s opening levels.
Markit’s UK manufacturing PMI for July was forecast to improve slightly from 54.3 to 54.4 but instead jumped from a revised 54.2 to 55.1.
Nationwide’s housing prices report from July also impressed, coming in at 0.3% month-on-month rather than the forecast -0.1% and beating the predicted 2.7% year-on-year with a result of 2.9%.
However, Wednesday’s UK construction PMI for July failed to offer the Pound any new support, coming in well below expectations with a result of 51.9 despite being forecast to come in at 54.5.
Analysts were largely unimpressed with the construction data. According to Howard Archer from the EY Item Club;
‘Weakened economy activity, a lacklustre housing market and appreciable economic and political uncertainties threaten to be a damaging combination for the construction sector over the coming months. Meanwhile, construction companies are currently still being squeezed by elevated input costs.
There is a risk that some companies may also be cautious about committing to major projects if there is any increase in level of uncertainty over the coming months.’
The construction report held Sterling back yesterday as investors awaited Thursday’s key session.
Euro (EUR) Holds Ground on Domestic and Global Factors
The Euro has withstood the Pound’s recovery attempts this week as markets are still optimistic about the shared currency’s upside potential and the economic outlook of the Eurozone bloc.
Besides a mixed Eurozone manufacturing PMI, this week’s data has largely indicated that the Eurozone is seeing solid growth as expected in the middle of the year.
The solid Q2 Eurozone Gross Domestic Product (GDP) projections of 2.1% growth year-on-year and 0.6% quarter-on-quarter have made analysts more confident that the bloc will continue to see solid growth in the second half of the year too.
On top of that, the Eurozone’s June unemployment rate came in at an unexpected 9.1% and Germany’s July unemployment change result was better-than-forecast.
Wednesday’s Eurozone data was largely low-influence. News that Spain’s unemployment change was a lower-than-forecast -26.9k in July didn’t notably weaken the Euro as Sterling was weak for most of the day too.
The Euro has also benefitted this week from broad weakness in its major rival, the US Dollar (USD).
US economic and political concerns have given markets reason to speculate the European Central Bank (ECB) could become more hawkish towards the end of the year while the Federal Reserve becomes more cautious.
GBP EUR Exchange Rate Forecast: Bank of England (BoE) Meeting in Focus
Thursday will be a major session for Pound exchange rates and is likely to see the GBP EUR exchange rate driven by Pound movement.
Not only will Markit publish its anticipated UK services PMI for July, the Bank of England (BoE) will hold its August monetary policy decision.
In June’s meeting, three members of the BoE Monetary Policy Committee (MPC) voted to hike UK interest rates due to surging inflation.
However, since then one of the hike voters, Kristin Forbes, has seen her tenure on the committee end, leaving the bank with one less hawk. UK inflation has also begun to slow.
Analysts predict two BoE policymakers will vote to hike rates this week. If there are less hawks than expected, Sterling is likely to weaken towards the end of the week and Pound Euro will fall.
If there are more hawks than expected though, Sterling will surge and should easily recover against the Euro.
Thursday’s Eurozone data includes Markit’s final July PMIs and June’s retail sales results. If these fall short of expectations this would also help the GBP EUR exchange rate to recover.