EUR/GBP Exchange Rate Rangebound, Is ECB ‘Willing to Mend Ties’ with Germany?
The Euro Pound (EUR/GBP) exchange rate held steady today, with the pairing currently trading around £0.864 after European Central Bank (ECB) President Christine Lagarde used her first speech to call for “strength, resolve and courage” in Europe. While initial hints suggest she has no major plans to implement any major changes to the bank’s monetary policy in the near term, analysts interpreted the speech as a peacemaker.
Analysts at Reuters commented:
‘Although Lagarde avoided the issue of the bank’s long-running feud with Germany, her decision to speak in Berlin days after taking office on [1 November] is likely to be seen as a symbolic olive branch and a signal that she is willing to mend ties.’
The EUR/GBP exchange rate remained unmoved today, but with Lagarde’s show of willingness to work with all sides in the Eurozone, predictions are that the feud between Germany and the ECB, triggered when the bank kept interest rates too low for German savers, might soon come to an end.
Meanwhile, Euro (EUR) investors will be looking ahead to today’s release of the Eurozone producer price index for September, which is expected to improve from -0.5% to 0.1% on the month.
GBP/EUR Exchange Rate Steady, UK Services Sector Remains Subdued in October
The Pound (GBP) failed to rise against the Euro today despite the UK Services PMI for October beating forecasts by reaching the cut-off point between expansion and contraction at 50, further indicating a subdued British economy.
Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, was downbeat:
‘The sector’s main difficulties are largely of Brexit’s making and with another deadline comes more indecision and delay… Companies are waiting for a resolution by the UK Government to salvage the current situation so workflows can begin again at healthier levels.’
Today also saw the release of October’s BRC Like-for-Like Retail Sales figure, which rose from -1.7% to 0.1% due to increased discounting designed to encourage “discouraged” shoppers. However, with the ongoing uncertainty surrounding the December general election, this failed to uplift the GBP/EUR exchange rate today.
Helen Dickinson, Chief Expectative at the BRC, was pessimistic, saying:
‘Unfortunately, the longer term trends remain bleak, with the 12-month average sales growth falling to a new low of just 0.1%. With Brexit still unresolved and a December election creating new uncertainties, retailers will be looking nervously at the months ahead.’
EUR/GBP Outlook: Could Euro Rise on Improving German Factory Orders?
We could see the shared currency edge higher against the Pound tomorrow if Germany’s factory orders figure confirms forecasts and rises from -0.6% to 0.1% in September.
Tomorrow will also see the release of Germany’s Markit PMI Composite figure for October. Any signs of improvement could further buoy market confidence in the common currency.
With no notable UK data due until Thursday, Sterling traders will focus on British politics ahead of December’s general election.
Any indication the Conservative Party could cling to a lead in the polls would boost the GBP/EUR exchange rate on returning hopes of political stability.