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Euro to Pound Sterling (EUR/GBP) Exchange Rate Rallies as Dovish Draghi Fails to Influence Euro Movement

EUR/GBP Conversion Rate Predicted to Strengthen after Eurozone Industrial Production Betters Estimates 

The Euro to Pound Sterling (EUR/GBP) exchange rate advanced by around 1.1% on Monday afternoon.

In response to better-than-expected domestic data the shared currency advanced versus the majority of its major peers. Gains have been somewhat limited, however, as US Dollar strength anchors the common asset. October’s Eurozone Industrial Production came in at 1.9% on the year, bettering the median market forecast 1.4% output growth. On a monthly basis, October’s Eurozone Industrial production gained by 0.6% which eclipsed the market consensus of 0.3%. Claus Vistesen from Pantheon Macroeconomics said it was ‘a strong start to the fourth quarter for manufacturing in the Euro area.’

Today also saw European Central Bank (ECB) President Mario Draghi make a speech in Bologna. Draghi’s words had minimal impact on the Euro, however, as he parroted previous assertions regarding his willingness to use all the available tools within his mandate to stimulate inflationary pressures.  ‘If the ECB had to intensify the use of its instruments to ensure that it achieves its price stability mandate, it would,’ Draghi said, according to a transcript of his speech. ‘While monetary policy can deliver price stability, that alone does not guarantee lasting prosperity. To have a structural recovery we need to raise not just current growth but potential growth as well,’ he added.

The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7296.

GBP/EUR Conversion Rate Predicted to Hold Losses after December’s UK House Prices Contracted

The only British data publications today produced a mixed-bag of results. Whilst December’s Rightmove House Prices advanced by 7.4% on the year, the monthly reading saw a -1.1% contraction. This caused many traders to speculate that the UK housing bubble might not be as serious a concern as formally which would ease pressure on the Bank of England (BoE) to make lending conditions less accommodative. With that being said, however, many industry experts still believe British house prices will rise in 2016.

Miles Shipside, director of Rightmove, said: ‘Whilst a fall is the norm at this time of year, this is December’s best post-financial crash performance, signalling another round of price rises in 2016. Despite the shortage of suitable stock in many parts of the market, demand for housing is on the up. Although the average price of property coming to market is already up by a hefty 7.4% compared to a year ago, Rightmove forecasts that prices will reach and breach new records next year.’

The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low of 0.7205 during Monday’s European session.

Euro to Pound Sterling Forecast: UK CPI to Provoke Volatility

Although trader focus is dominated by the forthcoming Federal Reserve interest rate decision, there are several highly influential economic data publications this week with the potential to provoke market volatility. Of particular significance to the EUR/GBP exchange rate will be tomorrow’s British Consumer Price Index for November. Low/negative inflation has been a persistent concern for Bank of England (BoE) policymakers so any positive result is likely to provoke a significant Sterling rally.

In terms of European data tomorrow’s Eurozone ZEW Economic Sentiment Survey is likely to have a significant influence on the shared currency. In addition, US inflation data may also impact the Euro thanks to negative EUR/USD correlation.

The Euro to Pound Sterling (EUR/GBP) exchange rate climbed to a high of 0.7301 during Monday’s European session.