- EUR GBP Exchange Rate Forecast to Drop – Sterling could rebound as selloff cools
- Brexit Concerns Undermine Pound Once More – Euro takes advantage of Sterling weakness
- Eurozone Retail PMI Disappoints – EUR GBP holds ground regardless
- Forecast: UK Trade Stats Due Friday – Sterling could drive EUR GBP movement
EUR GBP Exchange Rate Forecast to Slip on Friday
While Sterling’s selloff appeared to cool on Wednesday, selling resumed on Thursday amid a lack of fresh UK data, as markets once again showed frustration that Britain was heading for a ‘hard Brexit’.
The day’s Eurozone data was mixed. Previously reported Retail PMI disappointed, but other German data may have impressed investors enough to help the Euro hold its ground.
Germany’s August factory orders reports improved from 0.3% to 1.0% month-on-month, and from -0.6% to 2.1% year-on-year. Germany’s September Construction PMI improved from 51.6 to 52.4.
In the middle of Sterling’s market-wide selloff in the afternoon, comments from the European Central Bank (ECB) confirming that it would continue its Quantitative Easing program did little to inspire Euro movement. The comments in the ECB’s latest minutes report appeared to be in response to recent speculation that the bank would abandon its QE measures early.
(Previously updated 12:22 BST 06/10/2016)
Thursday’s news had little effect on this week’s EUR GBP exchange rate forecast, as the pair continues to hover near its best levels. While the pair has struggled to advance due to mixed Eurozone sentiment and key psychological resistance, GBP investors continue to reel from this week’s Sterling selloff, leaving the currency limp.
The Eurozone’s September Retail PMI results disappointed investors. Germany’s figures slipped from 54.1 to 53, while the overall Eurozone score fell into contraction of 49.6.
(Previously updated 16:38 BST 05/10/2016)
EUR GBP Exchange Rate Forecast to Fall from Best Levels on Thursday
The EUR GBP exchange rate forecast remains on the downside on Wednesday afternoon, as EUR GBP failed to extend its gains or hold its best levels much on Wednesday, but a weak Sterling was unable to mount a particularly strong recovery either despite the day’s solid PMI scores.
Instead, GBP investors were a little more reassured by comments made by Britain’s Prime Minister Theresa May during the day’s Conservative Conference speech.
In it, May briefly aimed criticism at the Bank of England (BoE) for its ultra-low interest rates, which she stated were worsening Britain’s class-divide. Critics of low interest rates were cheered by the news, which allowed Sterling to strengthen from its worst levels.
The Euro is likely to take point in EUR GBP movement on Thursday, as the day will see the publication of key German stats such as August factory orders, and PMI results for construction and retail.
(Previously updated 10:13 BST 05/10/2016)
EUR GBP Exchange Rate Holds Multi-Year Best after PMI Results
The Euro Pound (EUR GBP) exchange rate remained trending in the region of a multi-year high following the publication of services & composite PMIs for both the UK and Eurozone.
The news that the UK’s services gauge declined by less-than-forecast in September did little to support the flagging Pound, particularly as measures for the EUrozone and Germany were positively revised from initial estimates.
(Previously updated 07:00 GMT)
Losses are possible in Wednesday’s EUR GBP exchange rate forecast, as investors cool from Monday and Tuesday’s Sterling selloffs and react to Britain’s better-than-expected PMI results. However, this may depend on whether Wednesday’s services PMI follows suite.
EUR GBP has gained almost a penny since markets opened since the weekend’s levels of 0.8667, soaring on both Monday and Tuesday and reaching a new three-year-high of 0.8762.
Euro (EUR) Holds Ground Despite Unexpected Drop in Producer Prices
The Euro has performed a little better this week thanks to weakness in the Pound and some better-than-expected manufacturing scores on Monday. However, a strong US Dollar has weighed slightly on demand for the shared currency.
Monday’s session saw the publication of the Eurozone’s final September manufacturing PMIs from Markit. While German and Eurozone scores met forecasts, Italian and French manufacturing came in better-than-expected.
Euro sentiment was also mixed due to comments made by European Central Bank (ECB) officials. While some officials hinted at hesitance to ease further due to the effects of low interest rates on banks, ECB chief economist Peter Praet stated that low interest rates would remain until Eurozone inflation has sufficiently recovered.
Tuesday’s news also weighed slightly on Euro demand as the Eurozone’s August producer price index came in slightly below expectations. The Wall Street Journal reported;
‘The prices of goods leaving the Eurozone’s factory gates fell during August for the first time since April, a sign that inflationary pressures remain weak more than four years into a modest economic recovery.
The European Union’s statistics agency said Tuesday that producer prices fell 0.2% from July, and were down 2.1% from August 2015. The month-to-month decline was a surprise, since economists surveyed by The Wall Street Journal last week had estimated that prices were flat on the month.’
Pound (GBP) Weak as Brexit Jitters Take Hold of Market Movement
Sterling has been sold off across the board since trading opened this week as global forex markets react to comments made by Britain’s Prime Minister, Theresa May, about how the country’s decision to leave the European Union will unfold.
May announced over the weekend that the British government would aim to activate Article 50 and begin the formal Brexit process by the end of March 2017.
She has played down any speculation of retaining access to the European Union’s single market or any other EU benefits. Instead, the PM indicated on Tuesday that Britain would aim for a new kind of trade deal rather than looking to keep certain aspects of EU membership.
UK markets had been hoping for some way to remain within the EU’s single market ever since the Brexit vote was confirmed, but this has always been dismissed by EU officials as impossible unless Britain was also willing to keep freedom of movement unchecked.
As Britain’s government has seemingly decided against pursuing single-market access, Sterling plummeted on Monday and Tuesday, with UK markets in a panic over trade in 2019 and beyond.
This week’s positive UK economic news and data failed to cheer Sterling investors. Monday’s September manufacturing PMI from Markit revealed that the factory sector had unexpectedly improved from 53.4 to 55.4.
Tuesday’s construction PMI also beat projections, unexpectedly escaping from a three-month long contraction and scoring 52.3.
Not only that, but the International Monetary Fund (IMF) announced on Tuesday that Britain was on track to be the fastest growing G7 economy in 2016, admitting that it had been overly pessimistic about a crash following the Brexit vote.
EUR GBP Exchange Rate Forecast: UK Services Could Drive Sterling Up from Lows
This week’s EUR GBP exchange rate forecast sees the pair remaining near its highs, but it is unlikely the Euro will be able to prevent Sterling from making some kind of recovery in the coming days.
After optimistic British economic news published throughout Monday and Tuesday, Sterling’s low value is largely due to long-term concerns about what will become of the British economy after the Brexit has been completed – supposedly in 2019 if the prospective timeline is adhered to.
As a result, investors are likely to cool this selloff in the coming days and may use the week’s PMI scores as footing to buy the currency from its lows.
Wednesday’s UK services PMI could give Sterling a firm leg-up if it beats expectations as services are Britain’s largest work sector. This would also complete a hat trick of better-than-expected UK PMIs.
As for the Euro, Wednesday will see the publication of final services figures for the Eurozone, which are widely expected to meet preliminary figures. As preliminary services scores disappointed, the Euro could strengthen if these final results beat projections.
However, as final scores typically print closely to preliminary results, Sterling is once again more likely to take point in Wednesday’s EUR GBP exchange rate forecast.