The Euro has remained down against the Pound on Thursday’s afternoon session, following the release of highly-anticipated European Central Bank (ECB) minutes.
Covering a recent monetary policy meeting, the minutes revealed that ECB officials are concerned about the strength of the Euro. Straight from the source, the minutes showed that;
‘Concerns were expressed about a possible overshooting in the repricing by…markets, notably the foreign exchange markets, in the future’
This goes in the opposite direction to policymaker hopes; if the Euro is getting too uncompetitive then ECB officials could struggle to raise inflation up to the 2% level, considered a requirement before higher interest rates are considered.
(First published 11:03, August 17th, 2017)
The Euro has made a moderate loss against the Pound today, despite signs of higher Eurozone inflation and a rising Eurozone trade surplus.
- EUR GBP rate slips to 0.9102 – GBP EUR rate up to 1.0986
- Euro slides on trader uncertainty – Positive Eurozone stats fail to shift EUR
- Pound advances on retail sales results – Slowdown is lower than expected
- Euro gains possible on ECB accounts – Next Pound shift possible on UK borrowing stats
While the Euro has dropped today, the EUR GBP exchange rate still remains near its highest level since November 2009.
Euro Down on Fears of ECB QE Continuation
The present Euro weakness is mainly a symptom of ongoing trader uncertainty about the imminent release of European Central Bank (ECB) minutes for a recent monetary policy meeting.
Domestic data has proven largely positive, with the Eurozone trade surplus expanding in June and core annual inflation also rising in July.
The main negative takeaway from the inflation news is that the rate of price growth remains below the ECB’s target of 2%, whichever field is looked at.
Pound Rises as Traders Analyse Retail Sales Slowdown
While the Euro has fallen today despite positive Eurozone news, the Pound has conversely risen in spite of seemingly poor UK data.
Retail sales in July have slowed in all fields, barring monthly sales including fuel sales. The Pound advance is primarily because some of the slowdowns were not by as much as forecast. Embodying this sentiment, Hargreaves Lansdown Senior Economist Ben Brettell said;
‘This could bode well for economic growth. The UK economy is heavily reliant on the consumer, and economists had expected falling real incomes to eventually translate into weak retail sales.
Euro to Pound Currency Exchange Outlook: ECB Accounts and Eurozone Construction in Focus
There is little in the way of UK economic news to come out on Friday, but the Euro could still be influenced by Eurozone data, both today and tomorrow.
Today, the last high-impact data will be out shortly, consisting of European Central Bank (ECB) meeting accounts.
Monetary policy was discussed at the meeting, which means the accounts could induce significant Euro movement. If it looks like policymakers are reluctant to end quantitative easing efforts then the Euro may fall further against the Pound.
Rounding off the week’s Eurozone news will be Friday’s construction output measure for June. The level of activity is tipped to fall from 2.6% to 2.5%, which would still be a respectable level of output.
Next week’s first UK data will come on Monday, covering government borrowing recorded in July. If the deficit reduces significantly, then the Pound may see an early rise against the Euro.
Current Interbank EUR GBP Exchange Rates
At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.9102 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.0986.