- Euro Pound Exchange Rate Trends with Upward Bias – BoE decision continues to weigh on GBP
- German Industrial Production Returns to Growth – Eurozone investor confidence also recovers
- Update: UK Manufacturing Disappoints – NIESR GDP estimate indicates possible recession
- Forecast: Eurozone Growth on Friday – Investors anticipate preliminary Q2 GDP figures
Euro Pound Exchange Rate Rally Continues Wednesday
The Euro continued to edge higher against the Pound throughout Wednesday’s session, boosted by news that the European Commission and Eurozone governments would not be pursuing fines for Portugal and Spain after the nations missed deficit targets. Instead, new fiscal targets were set for the nations to fulfill over the next year.
The Pound, on the other hand, was weakened by news that the Bank of England’s (BoE) new quantitative easing scheme had already hit a snag.
After being announced last week, the bank’s first reverse auction ended with the bank £52m short of the £1.17bn bond-purchasing target. This ignited bank critics and weighed on Sterling in the morning.
While the bank’s second attempt on Wednesday afternoon was a success, injecting £1.17bn into the British economy, market sentiment remained downbeat, allowing EUR/GBP to near 0.86.
(Previously updated 16:30 BST 10/08/2016)
Euro Pound Exchange Rate Gains on Poor UK Data
The Euro Pound exchange rate remained trending higher on Wednesday as the Bank of England’s quantitative easing programme failed to have the desired impact.
EUR/GBP was left trending in the region of 0.8588.
(Previously updated 09/08/2016)
As Tuesday’s European session progressed the Euro Pound exchange rate extended previous gains as Sterling softened in response to disappointing UK data.
Annual Manufacturing Production printed at 0.9% rather than the 1.3% forecast while the trade deficit swelled.
The EUR/GBP exchange rate was left trending in the region of 0.8535.
With economists expecting post-Brexit UK data to underperform expectations for the foreseeable future, and the Bank of England (BoE) poised to loosen policy further in such circumstances, the Pound has a negative long-term outlook and it’s likely the EUR/GBP exchange rate will extend gains as 2016 progresses.
(Previously updated 08:30 09/08/2016)
The Euro Pound exchange rate edged higher when markets opened on Monday as British investors remained wary following last week’s shocking Bank of England (BoE) easing measures. Meanwhile Euro sentiment remained solid thanks to a continuation in the trend of positive Eurozone data.
EUR/GBP began to near its highest levels once more on Monday, briefly rising above the key level of 0.8500 after climbing from a low of 0.8351 last week. EUR/GBP’s highest level since the Brexit vote has been 0.8602, which it briefly reached in the first week of July.
The Pound, meanwhile, also declined against the US Dollar, Australian Dollar and New Zealand Dollar as investors responded to the BoE beginning its quantitative easing scheme.
Euro (EUR) Bolstered as Investors Shake off Brexit Jitters
The Euro has been trending with an upward bias for the last few weeks, briefly slipping last week as favour returned to the US Dollar.
News that the Eurozone economy has seemingly weathered Brexit-influenced market panic since the UK’s EU Referendum in June has seen appeal for the shared currency restored somewhat.
PMI figures released for July have all but confirmed that for the Eurozone, the economy is largely progressing as normal. The Pound-associated Euro was dragged down against other currencies after Britain’s Brexit vote, but the latest Eurozone news has seen it make a sturdier recovery.
Monday’s latest Eurozone figures continued this trend. German industrial production improved from -0.9% to 0.8% in June, giving the sector a return to growth and scoring better than the expected 0.7%. This also brought the yearly score up from -0.4% to 0.5%.
Yet more evidence that the Brexit vote was no longer affecting Eurozone confidence was published in the form of Sentix’s latest Eurozone investor confidence survey. The Financial Times reported;
‘European investors and economists appear to have put Britain’s shock vote to leave the EU behind them – well for now at least – as an index measuring sentiment about the prospects of the Eurozone economy rose in August.
The Sentix economic index improved to a reading of 4.2 for August following a sharp plunge to 1.7 in July. The index had almost touched a reading of 10 in June.’
This left the Euro sturdy on Monday as it successfully pushed back any recovery attempts from the Pound.
Pound Sterling (GBP) Exchange Rates Slump on Lack of Positive Data
Since last week’s Bank of England (BoE) policy decision meeting – or ‘Super Thursday’ – the Pound has had a difficult time holding its ground against major currencies.
The bank announced that it would be cutting UK rates from 0.50% to 0.25%, extending quantitative easing and introducing a new corporate bond purchasing scheme, in a historic stimulus package and the first BoE action since 2009.
In effort to stave off Brexit-related damage, the bank’s policymakers introduced four points of easing and even revealed that the door was very much open for further easing down the line if these did not help to improve Britain’s growth outlooks.
The BoE Deputy Governor, Ben Broadbent, went as far as to comment on Friday that if growth did not improve beyond expectations soon, he would already be willing to vote for another UK rate cut.
This bearish stance as well as similar remarks from BoE Governor Mark Carney has made it difficult for Sterling to recover. Market focus being turned to the US Dollar following a solid US NFP report last Friday has also made it difficult for Sterling to sustain any gains.
Euro Pound Exchange Rate Forecast: June Figures Unlikely to Shift EUR/GBP Today
Tuesday sees the publication of Britain’s biggest slew of data this week. However, the June figures are unlikely to mean much due to the huge political and economic shifts since June’s Brexit vote.
As a result, even if June’s industrial and manufacturing production scores beat expectations they are unlikely to offer Sterling the means for a recovery.
On the other hand, NIESR is expected to release its July Gross Domestic Product (GDP) estimate on Tuesday afternoon. Analysts expect NIESR’s figure to come in at around 0.4%, but a worse-than-expected figure could cause Sterling to fall deeper into its recent lows.
Tuesday’s Eurozone data is a little less influential, and the week’s most highly anticipated Eurozone print will not release until the preliminary Q2 Eurozone growth report publishes on Friday.
As a result, it is likely that the Pound’s attempts to recover (or further drops in appeal) will drive the Euro Pound exchange rate for much of the week.