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EUR GBP, EUR USD Exchange Rates on the Decline; Persistent Deutsche Bank Fears Drag

Steady German unemployment figures have helped strengthen the Euro Pound (EUR GBP) and Euro US Dollar (EUR USD) exchange rates.

  • EUR exchange rates advance on German Data – CPI could further boost Euro
  • Warnings over Brexit weaken GBP once more – Further evidence of no single market access without freedom of movement
  • Rising rate hike bets firm USD – Further Fed speeches to come
  • Volatility in store for EUR USD – German inflation and Fed speeches will alter central bank outlooks

The Pound is on the decline thanks to fresh Brexit worries, while the US Dollar is advancing ahead of a packed schedule of Fed speeches.

Pound Recovering Losses after Strong Confidence and Business Barometer

08.42, 30/09/2016: The latest UK data has boosted appetite for the Pound, pushing GBP/EUR back towards the levels seen before yesterday’s losses. The GfK consumer confidence survey has showed negative sentiment eased significantly, climbing from -7 to -1; its pre-referendum level. The Lloyds business barometer also showed a strong improvement, climbing from 16 to 24.

EUR/GBP has edged back down to 0.8627.

Mixed Consumer Price Index Figures Fail to Generate Euro Tailwinds

11.00, 30/09/2016: The Euro has remained unresponsive to the latest consumer price index figures. While overall price growth accelerated from 0.2% to 0.4% as forecast, the less-volatile core index remained at 0.8% instead of ticking higher to 0.9%. Deutsche Bank fears continue to weigh on the Euro, despite market speculation of a smaller fine than the initial US$14 billion being levied, although EUR GBP exchange rates have managed to narrow losses from -0.5% to -0.4%.

German Unemployment Data Hardens Euro Exchange Rate Support

The latest German unemployment figures have largely relieved markets after printing in line with forecasts. The rate of joblessness reprinted at 6.1%, which is significantly below the Eurozone average and the lowest level in Germany since Reunification. While the total number of people out of work did edge up by 1,000 to 2.608 million – the first time it has done so in a year – the forecasts had only been for a decline of -5,000, so the result was not a drastic departure from what was expected.

Increasing joblessness could be a sign that businesses are getting jittery, given the latest poor economic data, but Germany’s BA labour agency claimed that there was still high demand for workers, with BA head Frank-Juergen Weise stating, ‘the labour market continued to develop positively.’

Overall, the Euro has remained strong. Expectations of an acceleration in the German consumer price index are keeping appetite for the common currency firm, although interim confidence data could cause a wobble for the single unit ahead of the main release.

Also boosting the Euro is news that optimism within the Eurozone has improved this month. According to data released by the European Commission, the sentiment index rose from 103.4 in August to 104.9, with retailers and industrial firms holding a more positive outlook.

Pound Sterling Weakens on Further Brexit Warnings

The UK Investment Association has warned that it has concerns about whether or not Britain’s fund managers will still be able to manage the £1 trillion of assets held on behalf of investors in mainland Europe once Brexit has been completed. The IA fears that clients in Europe may repatriate their investments to within the Union post-Brexit. According to one anonymous IA member;

The most direct impact [of the referendum] is that it raises questions about our ability to work for clients in Europe. People will assume that the current legislation and regulatory framework lasts for a while but they have no idea how it will change [or] how it will be renegotiated.

Meanwhile, head of the BDI – an influential body representing German industry – Markus Kerber became the latest high-profile EU figure to state emphatically that the UK could not have access to the single market while tightening its controls on immigration. Speaking on the Today programme on BBC Radio 4, Kerber explained;

We have a rough idea of what the British government wants to see. It wants to have relatively full access to the single market and yet limited on non-existing freedom of movement of labour…That I think is impossible at the moment, so what we think the British government wants I can tell you straight away is not what the continental Europeans are willing or even able to give, then it will be relatively short negotiations.

Improving Federal Reserve December Rate Hike Bets Boost US Dollar

Euro US Dollar currency forecast

Recent commentary from Federal Reserve officials has helped firm market expectations of tighter monetary policy. Odds on a December rate hike from the Fed have been fluctuating over recent weeks, but are in a relatively strong position today, with markets pricing in a 53.1% likelihood of monetary tightening.

While Charles Evans did suggest low interest rates were likely to persist for some time – part of the ‘new normal’ rhetoric increasingly deployed by central bankers – Loretta Mester and Esther George continued to advocate tightening monetary policy. The key disagreement amongst Fed officials, which is preventing hike bets from taking a solid majority thus far, is whether or not the US economy is stagnating or overheating.

With a packed data calendar ahead, there is plenty of opportunity for both the economic and monetary policy outlooks to improve or deteriorate.

EUR GBP, EUR USD Exchange Rate Forecast; German Inflation and Packed Fed Calendar Promise Volatility

German consumer prices data is set for release later today; with a rise from 0.4% to 0.6% forecast there is potential for the Euro advance to extend bullishly. Rising inflation would be a significant relief for the European Central Bank (ECB) – and therefore the markets – considering President Mario Draghi has recently started to suggest the bank is reaching the limits of certain policy measures, such as interest rate cuts and quantitative easing.

There is no UK data left for release today, leaving the Pound likely to stew in Brexit-based market concerns.

As well as a slew of tier 2 data, including initial and continuing jobless claims figures, today will also see public appearances from four more officials (Patrick Harker has already spoken); Dennis Lockhart, Jerome Powell, Neel Kashkari and Janet Yellen. Considering all of these policymakers voted in favour of a rate freeze at this month’s policy meeting, comments favouring a rate hike from any of them would significantly boost the outlook for US borrowing costs.

Current EUR, GBP, USD Conversion Rates

The Euro Pound (EUR GBP) exchange rate is currently trending around 0.8634, while the Pound Euro (GBP EUR) exchange rate is currently trading in the region of 1.1582.

The Euro US Dollar (EUR USD) exchange rate is currently trending around 1.1221, with the US Dollar Euro (USD EUR) exchange rate trading in the region of 0.8910.

The Pound US Dollar (GBP USD) exchange rate is currently trending around 1.2995 while the US Dollar Pound (USD GBP) exchange rate is trading in the region of 0.7694.