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Euro Pound (EUR GBP) Soars as Draghi says QE Tightening Discussions will start September

Pound Euro exchange rate forecast
  • ECB leaves interest rates & QE unchanged – Euro/Pound climbs 1.20% as Draghi expresses positive sentiment
  • UK retail sales beat expectations – Consumer spending likely to remain downcast
  • Brexit talks fail to progress – Exit bill remains at impasse

The Euro has steadily gained against the Pound today, despite the largely dovish slant to the European Central Bank (ECB) meeting and the better-than-expected UK retail sales.

The highly anticipated ECB meeting took place today with the announcement that interest rates would remain unchanged at the record low of 0.0%.

Whilst initially the Euro saw a minor drop against the majors, it soon surged after ECB President Mario Draghi spoke at the press conference, asserting that the central bank recognised signs of unquestionable improvement in the Eurozone’s growth and that quantitative easing talks will likely start in September.

Whilst Draghi did not directly set a time frame for the tightening of the ECB’s currently extremely loose monetary policy, he did assert that policymakers were ‘unanimously agreed’ that such talks will, and should take place during the summer recess.

The Euro gained over 1% against the Pound shortly after, with Sterling itself suffering from its own range of maladies.

Brexit Talks Stall as Exit Bill Reaches Impasse, GBP Exchange Rates Fall

Meanwhile, Pound Sterling (GBP) exchange rates are struggling as a result of the latest Brexit developments.

Brexit talks resumed this week but failed to make any significant ground due to both sides reaching an impasse.

Citizens’ rights are still a point of contention, as is the issue of the Northern Irish border and the so-called ‘divorce bill’. Whilst UK Brexit Secretary David Davis insisted that negotiations had been ‘robust’, Michel Barnier, Chair of the European Commission, called for more clarification on the UK’s position, stating:

‘We require this clarification on the financial settlement, on citizen’s rights, on Ireland – with the two key points of the common travel area and the Good Friday Agreement – and the other separation issues where this week’s experience has quite simply shown we make better progress where our respective positions re clear.’

Political controversies and stagnation within the Brexit talks continue to hurt the Pound’s ability to hold onto gains, as many investors feel that the seeming lack of progression this week is reason enough to sell the Pound in favour of more stable currencies.

UK Retail Sales Beat Expectations but Still Remain Low for Second Quarter

Today’s EUR/GBP exchange rate gains occurred despite the fact that Sterling had some seemingly good news this morning as this month’s UK retail sales figures beat expectations.

The high summer temperatures were demonstrated to have boosted the sales of clothing, thus propelling the overall retail sales figure.

The month-on-month quantity of goods sold online and in store jumped by 0.6%, ahead of forecasts of 0.4% and demonstrating a significant increase from the previous month’s slump of -1.1%.

This leap is, however, of little consequence when considered within the context of a wider space of time; as the second quarter growth has only just about counteracted the decline within the first quarter.

Additionally the second quarter’s rebound will do little to dissipate anxieties regarding the long-term outlook of spending with inflation levels still massively exceeding wage growth – something that continues to put household budgets under pressure.

EUR GBP Forecast: Outlook Positive as Weekend Approaches

The near-term outlook for the Euro to Pound exchange rate is predominantly positive with little to no significant Eurozone data remaining on the calendar for this trading week. However, the UK’s public sector net borrowing figures for June are due tomorrow and are currently forecast to have significantly dropped, should this materialise then the Pound may well get a chance to regain a small amount of ground before the week ends.

Current Interbank EUR GBP Exchange Rates

At the time of writing, the Euro to Pound Sterling (EUR GBP) exchange rate was trading at 0.8972 and the Pound Sterling to Euro (GBP EUR) exchange rate was trading at 1.1144.