Common Currency (EUR) Falters Further on Weakening German Trade Balance, EUR/GBP Holds on Downtrend
While German Export and Import figures this morning have come in well above expectations, at growth of 2.4% and 2.2% respectively, the nation’s Trade Balance has disappointed with a lower than forecast surplus. As this has kept the Euro (EUR) on a relatively dovish trend, the EUR/GBP exchange rate remains down in the range of 0.7284.
Although German Industrial Production fell by less than forecast today the Euro (EUR) has softened as a result of a diminishing Investor Confidence index.
Dovish ECB Comments Weighed on the EUR/GBP Currency Pair in spite of Weak UK PMIs Holding Back Pound
Last week initially saw the Euro (EUR) continuing to ride high on the general caution of traders as Chinese data remained less than encouraging and the Eurozone’s Unemployment Rate dropped to its lowest level in three years. However, while Thursday’s European Central Bank (ECB) Rate Decision was not as negative as some had feared, with the decision made to hold interest rates at 0.05%, the accompanying press conference proved otherwise. ECB President Mario Draghi made a number of dovish comments regarding the probability of fresh quantitative easing measures coming in the near future and a commitment to keeping the single currency relatively weak, sufficiently spooking pundits and rapidly driving the EUR/GBP exchange rate back down to 0.7279.
This was strongly to the benefit of the Pound (GBP) which had been struggling throughout the week on the back of the UK’s disappointing Manufacturing, Construction and Services PMIs. Somewhat unfortunately it was the services sector that reported the greatest shortfall, falling from 57.4 to 55.6. As this particular industry contributes the largest proportion to domestic GDP, this poor showing further reinforced fears that the Bank of England (BoE) will not be in a position to raise interest rates before the latter months of next year. This helped counteract the dampening effect of Draghi’s words to set the EUR/GBP pairing climbing again ahead of the weekend.
Eurozone Investor Confidence Downturn Undercuts the Strength of the Euro (EUR) Conversion Rate Today
Although the Chinese stock market has begun to dip once more this morning the common currency is failing to particularly strengthen on the prospect, its appeal to risk averse investors remaining low over the continued potential for monetary tightening from the ECB. Nevertheless, with the European indices remaining relatively unscathed by this new round of Asian sell-offs, the greater impact on the EUR/GBP pairing today has been a below-forecast result on the Eurozone Sentix Investor Confidence index for September. While the German Industrial Production figure fell by less than had been anticipated on the year, coming in at 0.5% rather than 0.3%, investor confidence within the currency bloc has sharply decreased. In response the EUR/GBP conversion rate has lost some of its recently gained ground, in spite of the Pound remaining relatively soft.
EUR/GBP Exchange Rate Forecast: Pound Could Decline Further on UK Trade Balance
Tomorrow’s second quarter Eurozone Gross Domestic Product could inspire a rally for the single currency should it reassure pundits by either remaining level or showing some manner of improvement in spite of recent economic pressures.
Conversely, the Pound may see a resurgence on Wednesday as the UK Industrial Production, Manufacturing Production and Visible Trade Balance figures for July are released. With an increase predicted on the domestic deficit though, this new data could equally compound concerns over the UK economy and thus maintain Sterling on its current dovish run.
Current EUR, GBP Exchange Rates
At time of writing the Euro to Pound Sterling (EUR/GBP) exchange rate is in a downtrend at 0.7314, while the Pound Sterling to Euro (GBP/EUR) pairing is moving positively at 1.3672.