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EUR GBP Holds around Five-Year High; Asian Session Trading Error Causes Pound Slide

Brexit concerns continue to weaken the Pound, allowing EUR GBP exchange rates to hold a three-year high.

  • EUR GBP Holds Gains on Brexit – Deutsche Bank fears fail to undermine Euro
  • GBP Weakened by Article 50 Talk – Weekend’s announcement continues to shake investors
  • Strong US Hike Bets Support Euro – Policy action still likely in December
  • EUR GBP Exchange Rate Forecast – UK services PMI trumps Eurozone releases

Deutsche Bank concerns did weigh on the Euro, but the common currency has remained dominant.

Trading Error sees Pound (GBP) Dive

09.41, 07/10/2016: A suspected trading error, exacerbated by low-liquidity trading, caused the Pound to nosedive during last night’s Asian session. EUR GBP managed to strike a new five-and-a-quarter year high as Sterling collapsed. GBP is edging higher from the night’s lows, but weak UK data is weighing on the Pound’s recovery.

Strong US Data Boosts Euro, Pushes GBP Lower

16.39, 06/10/2016: US jobless claims data has boosted the US Dollar, buoying the Euro on hopes of higher US interest rates by the end of the year. Tighter US monetary policy would weaken the Euro on US Dollar strength, essentially providing the effects of looser Eurozone policy without the ECB having to risk economic damage with measures such as lower negative interest rates or more quantitative easing.

Weak Eurozone Retail PMIs Temporarily Undermine Euro GBP Exchange Rate Gains

12.07, 06/10/2016: The Euro has advanced again; clearly the negative market sentiment overshadowing the Pound is far too strong to enable a rally just yet. EUR GBP exchange rates are currently up 0.2% on opening levels, trading around 0.8807.

10.40, 06/10/2016: Euro gains have eased back towards opening levels after the release of largely poor Eurozone PMIs, which showed that the retail sectors in the Eurozone, France and Italy either entered or remained in contraction in September.

GBP EUR Remains around Five-Year Low as Market Contemplates Single Market Loss

08.50, 06/10/2016: Yesterday’s brief Sterling rally was nothing more than a ‘dead cat’ bounce, with the Pound currently heading back towards a five year low against the Euro. Markets are still reacting negatively to a series of comments made by the Prime Minister over the course of the weeks that suggest the UK is heading out of the single market completely.

Pound Euro Edging Back after Striking Five-Year Low of 1.1301

08.55, 05/10/2016: Pound Euro exchange rates have continued to weaken today, having already hit their lowest levels in more than five years. GBP is edging away for now, although if today’s services PMI was to reveal any signs of weakness, GBP EUR could fall into the 1.12 range.

Deutsche Bank Fears Unsettle Euro, Fed Rate Hike Hopes Provide Support

Markets continued to worry over the fate of Deutsche Bank today. There had been rumours before the weekend that the US Department of Justice (DoJ) would agree to lower the fine from US$14 billion to US$5.4 billion. Markets had initially been sceptical, but had nonetheless hoped this was true; especially considering Deutsche Bank head John Cryan was in the States at the weekend anyway attending an International Monetary Fund (IMF) event.

However, a lack of news since has seen traders abandoning hopes. The figure of US$5.4 billion is believed to have been misused from a Lloyds research note, in which the bank speculated Deutsche had US$5.4 billion set aside to cover fines.

Continued strong bets of tighter US monetary policy before the end of the year helped support the Euro. A stronger US Dollar would pressure the Euro lower, allowing the European Central Bank (ECB) to hold fire on additional stimulus measures.

Pound Euro Holds Three-Year Low on Swirling Brexit Fears

The weekend’s surprise, that Theresa May would trigger Article 50 by the end of March 2017 at the latest, continues to inspire a Pound rout today. Further comments from the Prime Minister on the Today Programme indicated that she intended to prioritise controlling immigration over retaining access to the single market. May stated that;

I think it’s not about the UK, in some sense, being a supplicant to the EU. It’s about the reciprocity here. A good trade deal is going to be of benefit to us and to the EU.

The Pound remains stuck around a three-year low against the Euro, dropping into the 1.13s during today’s session, while GBP/USD has collapsed to its lowest level in 31 years. The weakness in the Pound has inflated the Footsie 100 to within a single point of its highest level of all time.

A surprise return to growth from the latest construction PMI hasn’t helped the Pound to recover. The index was forecast to tick higher to 49.2, but instead advanced to 52.3. Also unable to help the Pound was the latest World Economic Outlook from the IMF, despite claiming the UK would be the G7’s fastest growing economy this year.

Explaining the decline was the Independent’s Economics Editor Ben Chu, who wrote;

The fundamental reason for Sterling’s descent is that traders believe there will be lower demand for Sterling assets as a result of Brexit – that we will ultimately do less trade with the rest of the world and that we will be poorer as a result. Argue the markets are wrong if you want to – but recognise what they are saying.

Euro Pound (EUR GBP) Exchange Rate Forecast; UK Services PMI to Dominate Movement?

While the Eurozone is set to release a slew of data tomorrow, most of the docket consists of finalised PMIs, which are likely to have little impact and promise few surprises. Eurozone retail sales growth figures are expected to show that sales slowed in August, which could weaken the Euro.

The UK, however, will release much more influential PMIs. Investors will be particularly keen to see the result of the services PMI, especially now that the other two indices this week have over performed. A strong rise here will likely give the Pound a boost.

Current EUR, GBP Conversion Rates

The Euro Pound exchange rate (EUR GBP) is currently trading around 0.8789, while the Pound Euro (GBP EUR) is currently trending in the region of 1.1375.