European Central Bank (ECB) Will Continue to do ‘Whatever is Needed’
UK and Eurozone news has driven notable fluctuations in the EUR/GBP pair over most of the week, but the Euro has ultimately gained on a considerably weakened Pound.
After hitting a high of 0.8104 during Thursday’s session and a low 0.8051 this morning, EUR/GBP is currently climbing again.
ECB minutes released yesterday revealed divided policymaker opinions, causing investor confusion on how to position themselves on the shared currency. While officials reached a wide consensus that easing measures should be put in place, some were unable to agree on what policies should be deployed.
Some policymakers suggested a tiered deposit rate system similar to that used by the Bank of Japan (BoJ). This method would have the effect of reducing the harm of negative exchange rates, which other policymakers argued showed little sign of causing harm in the first place.
This indicates that negative exchange rates may indeed be possible in the future. ECB President Mario Draghi has continued to claim that the central bank will do ‘whatever it takes’ to kickstart the Eurozone economy.
Pound Sterling (GBP) Pressured as UK Production and Trade Balances Worsen
With poor UK data rounding off the week, Pound Sterling (GBP) came under pressure during the European session.
This comes after a report yesterday from the Official for National Statistics revealed that labour output had shrunk by -1.2% in Q4 2015, the fastest fall since 2008.
British data has been largely negative this week, with this morning’s set adding to the disappointment. Industrial and Manufacturing Production data came in negatively, not only falling short of forecasts but dropping on the previous month’s negatively revised figures.
Year-on-year industrial production printed at -0.5% from the previous figure of 0.1%, while manufacturing figures for the same period came in at -1.8% from -0.3%.
Trade balance data detailed a slight narrowing in the deficit, but the result was far from meeting forecasts. The total UK trade deficit is -£4840 as of February. January’s figure was -£5234 and economists expected the deficit to narrow to -£3400.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: BoE Decision Next Week
The EUR/GBP pair is currently preparing to end the week up on its opening levels of 0.8016.
However, gains appear to be easing and we may see increased Euro volatility if the ECB takes further action to stimulate Eurozone inflation. Sterling, on the other hand, is currently so volatile that any positive news Britain gets is largely unable to help it sustain any long-term gains.
NIESR release their UK GDP estimate later today and amid the slew of bad data for the nation published this week, the result is unlikely to bring hope to the Pound.
Next week’s data releases seem likely to cause inspired moves in the EUR/GBP pairing with major British CPI releases for March being released on Tuesday, followed by the Bank of England’s (BoE) key rate and asset purchase target decisions on Thursday.
The Eurozone, on the other hand, is set to release Final CPI prints for March. These figures are likely to give investors and the ECB an idea of the progress the economy is making.
The Euro to Pound Sterling (EUR/GBP) exchange rate currently trends around 0.8083 while the Pound Sterling to Euro (GBP/EUR) exchange rate trends in the region of 1.2370.