The Euro has lessened its losses against the Pound today, but is still down by -0.5% in the pairing.
The European Central Bank (ECB) minutes for May showed division over how the Eurozone was performing;
‘Some members considered that the risks to real GDP could now be characterised as broadly balanced, in particular given the improvement in recent data and indicators and the decline in political uncertainty. Other members maintained that downside risks to growth still prevailed and that a change in the risk assessment was premature in view of continued risks and uncertainties, globally and in the Euro area’.
Additionally, the minutes showed that ECB Chief Economist Peter Praet was concerned about officials talking too openly about monetary policy. This may lead to less Euro volatility in the future, at the cost of smaller speeches from ECB officials.
(First Published 12:49, May 18th, 2017)
The Euro has dropped sharply by -0.8% against the Pound today, following forecast-beating UK sales results.
- EUR GBP rate slumps to 0.8540 – GBP EUR jumps to 1.1706
- Euro crashes against dominant Pound – Little support from falling French jobless rate
- Pound soars on UK retail sales – Will wage squeeze batter future sales figures?
- Euro advance possible on incoming ECB minutes – Will Pound gain further on CBI stats?
Eurozone news today has been limited but positive, with French unemployment falling in the first quarter. The drop has been moderate, with the Q4 2016 unemployment rate falling from 10% to 9.6% in Q1 2017.
This was a historical best for France, with the new jobless rate being the lowest since 2012. The pre-election slump may be a sign of things to come for the French jobs market, as new President Emmanuel Macron has pledged to reform the national labour code.
While Macron is expected to try and cut around 120,000 public sector jobs, he could also boost job creation if his economic plans draw more overseas investment to France.
More minor Eurozone news has seen the Dutch unemployment rate remain at 5.1% in April, which has had a net neutral effect on Euro demand.
The Pound has rallied strongly against the Euro today, jumping from an opening 1.1620 to 1.1726 after the UK’s retail sales figures were announced.
Covering April, the results showed above-forecast increases across the board, which defied expectations of wage squeeze damage.
Economists were quick to scrutinise the result, however, with IHS Markit’s Howard Archer stating;
‘Worryingly for UK growth prospects, the squeeze on consumers looks highly likely to tighten further over the coming months as rising inflation eats further into purchasing power, with the pressure reinforced by ongoing muted earnings growth. There is also a strong likelihood that consumer confidence and willingness to buy major items will soften’.
The Euro could recover on incoming European Central Bank (ECB) minutes today, should they show ECB optimism. If policymakers upgrade their economic forecasts in the wake of Macron’s inauguration, the EUR GBP exchange rate could advance.
The last major Eurozone news this week will be a speech by ECB President Mario Draghi today, followed by further ECB speeches on Friday. Ending Friday’s announcements will be the May Eurozone consumer confidence flash.
This is forecast to improve from -3.6 to -3, which would still leave estimated confidence at a very low level.
The Pound may rise further against the Euro on Friday, when Confederation of British Industry (CBI) industrial orders figures come out. Predictions are for no change in May, but as the previous result was positive the Pound could still advance on the news.
Current Interbank EUR GBP Exchange Rates
At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading up down at 0.8536 and the Pound to Euro (GBP EUR) exchange rate was trading up at 1.1713.