Euro to Pound Exchange Rate Slips Lower as UK Wages Data Beats Forecasts
A combination of optimistic comments regarding UK-EU Brexit negotiations, as well as some stronger-than-expected UK ecostats, have kept the Euro to Pound Sterling (EUR/GBP) exchange rate near its worst levels in over a month.
EUR/GBP was unable to sustain last week’s gain attempts, eventually ending the week slightly lower in the region of 0.8945.
Since markets opened this week, EUR/GBP has fallen another half a penny. EUR/GBP trended close to a one-month-low of 0.8890 at the time of writing on Tuesday morning.
As the Euro (EUR) continues to be driven largely by strength in rivals, the Euro to Pound exchange rate has been influenced mostly by Pound (GBP) strength and Brexit news.
The primary cause of EUR/GBP losses this week so far has been due to the latest Brexit comments from EU Chief Negotiator Michel Barnier, but UK wage data has been influential too.
Euro (EUR) Exchange Rates Avoid Further Losses as Eurozone Data Beats Forecasts
The Euro’s movement has been driven largely by the strength of its rivals in recent weeks, as Eurozone data has been mixed or underwhelming and fears have risen about US-EU trade relations.
This made it easier for the Pound to push EUR/GBP lower on Monday, but the Euro held its ground a little better on Tuesday as the Pound’s bullishness cooled and the latest Eurozone ecostats beat expectations.
The Eurozone’s Q2 employment change figures remained at 0.4% as expected quarter-on-quarter, but the year-on-year figure unexpectedly rose from 1.4% to 1.5% showing that jobs were being made at a faster pace than expected in the bloc.
On top of this, ZEW’s September economic sentiment survey from Germany and the Eurozone was much lighter than expected.
The German sentiment print lightened from -13.7 to -10.6, rather than worsening to -14.0 as forecast. The Eurozone figure lightened from -11.1 to -7.2 rather than the forecast -10.9.
Germany’s current conditions print unexpectedly improved to 76, rather than slipping from 72.6 to 72.0 as forecast.
The news indicated that perhaps US-EU trade jitters were not impacting Eurozone confidence as much as feared.
Pound (GBP) Exchange Rates Hold Near Best Levels on Comments from EU’s Barnier
On Friday, investors bought the Pound in reaction to comments made by EU Chief Negotiator Michel Barnier, and Barnier gave the Pound yet another boost on Monday.
Investors have been becoming more hopeful about progress in Brexit negotiations, and the perceived possibility of a good UK-EU Brexit deal being achieved has risen.
Michel Barnier said on Monday that it would be ‘realistic’ to expect a UK-EU deal to be made within the next 8 weeks, before an emergency UK-EU Brexit summit is planned to be held in November.
Negotiators have been playing down the possibility of a worst-case scenario ‘no-deal Brexit’ by reminding markets that both sides are hoping to achieve a deal soon.
Sterling avoided falling far from its monthly highs on Tuesday thanks to the day’s impressive UK wage data, which showed that UK wages were growing at a faster pace than expected.
Some analysts speculate this stronger wage growth trend could continue too, lending some more support to the Pound outlook.
Could Thursday Central Bank News Influence Euro to Pound (EUR/GBP) Outlook?
The Euro to Pound (EUR/GBP) exchange rate’s influence from economic data has been limited so far this week, with investors focusing on developments in Brexit negotiations.
As the Pound continues to recover from August’s lows, there may be further losses ahead for the Euro to Pound exchange rate so long as there are more optimistic Brexit developments.
However, as well as Brexit news, investors are anticipating Thursday’s major Central Bank news.
The Bank of England (BoE) and European Central Bank (ECB) will both hold September monetary policy decisions on Thursday, and any surprises could lead to some notable shifts in EUR/GBP movement.
Neither bank is expected to announce any changes to monetary policy, but the tone the banks take on economic outlooks could prove highly influential.
In particular, Pound investors will be paying attention to any BoE comments regarding the Brexit process or the future of BoE Governor Mark Carney. Meanwhile, Euro investors will be interested in the ECB’s views on US-EU trade tensions.
Eurozone industrial production data on Wednesday and German inflation stats on Germany could also influence the Euro to Pound (EUR/GBP) exchange rate in the coming days.