The Euro has been supported by solid domestic data today, leading to a clear advance against the Pound.
- EUR GBP rate rises to 0.8880 – GBP EUR trades down at 1.1258
- Euro bolstered by rising ZEW scores – Surveys show higher German confidence
- Pound slides as traders analyse Carney speech – Fear of slow pace of interest rate hikes
- Euro may slip if confidence drops – Pound turbulence possible on BoE comments
Monday saw the Euro progressively advance against the Pound, opening at an exchange rate of 0.8792 and closing in the region of 0.8848.
Euro Pushed Higher by Unexpected ZEW Scores
Confidence statistics have strongly supported the Euro today, enabling it to regain lost ground against the previously dominant Pound.
The single currency has been pushed up by rising trader optimism, following a rise in ZEW consumer sentiment scores for September.
On the month, Eurozone-wide confidence rose by less than forecast, but the high-impact German score exceeded estimates.
Making this good news overall, the German current conditions score also rose.
Pound Slumps as Traders Digest Carney Comments
The Pound has seen a -0.4% drop against the Euro today, resulting in the loss of gains secured at the end of last week.
Sterling previously advanced over optimism about Bank of England (BoE) comments, which implied that a UK interest rate hike could be imminent.
Since last week, however, BoE Governor Mark Carney has spoken again, this time implying that UK interest rates could increase at a slower and more limited pace.
On the subject of inflation, Carney had this to say;
‘The latest indicators are consistent with UK demand growing a little in excess of the diminished rate of potential supply growth, and the continued erosion of what is now a fairly limited degree of spare capacity.
Recent developments suggest that inflation remains likely to overshoot the 2% target over the next three years’.
This forecast has had a mixed reception. On the one hand, inflation remaining above the BoE’s target would incentivise the central bank to continue raising interest rates.
On the other hand, however, unless average wage growth keeps pace with inflation then UK consumers could face consistently diminishing real incomes.
Euro to Pound Forecast: EUR GBP Rate may Slide on Eurozone Confidence Score
While the Euro has advanced considerably against the Pound today, the pairing could lose ground on Thursday afternoon when September’s Eurozone consumer confidence flash comes out.
Serving as an initial estimate of Eurozone-wide confidence, this is predicted to either remain negative at -1.5 points or worsen to -1.6 points.
This would not be the worst outcome in the world, given that confidence has progressively improved since a year ago.
The next major UK economic event will come sooner, consisting of today’s speech by the Bank of England’s (BoE) Donald Kohn.
Kohn is a member of the Financial Policy Committee (FPC) rather than the Monetary Policy Committee (MPC), but could still influence the Pound.
Specifically, if he touches on monetary policy or gives a forecast for the UK economy then the Pound could be pushed up or down, depending on Kohn’s tone.
Current Interbank EUR GBP Exchange Rates
At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.8880 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.1258.