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Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: Pound Climbs as Trade Deficit Narrows

With Chinese stock markets having recovered somewhat from the week’s rout, the Euro to Pound Sterling (EUR/GBP) exchange rate has retreated from a ten-month high of 0.7482.

Dovish Osborne Talked Down Pound Sterling (GBP), Euro (EUR) Bolstered by Safe-Haven Demand

Demand for the Euro (EUR) exchange rate continued to build on Thursday after the news that Chinese stock markets had been closed after just twenty-nine minutes. Trading was automatically shut down by the recently introduced circuit breaker mechanism as shares slumped by 7%. With the world’s second largest economy appearing to show significant signs of slowing, another spike in safe-haven sentiment saw pundits flocking back to the single currency. Although Eurozone Retail Sales proved somewhat disappointing for November this was swiftly offset as unemployment within the currency union was revealed to have unexpectedly fallen to a four-year low of 10.5%.

With UK data releases limited, the Pound (GBP) was pushed down as a result of comments from Chancellor of the Exchequer George Osborne, who sought to highlight the downside risks to the UK economy. Warning against supposed complacency and a ‘cocktail of threats’, Osborne did little to encourage confidence in Sterling.

Euro Softens as German Industrial Production Slows, EUR/GBP Exchange Rate Falls from Ten-Month Best Today

Following Chinese authorities’ suspension of the circuit breaker system markets took on a rather less panicked atmosphere this morning, prompting the common currency to soften somewhat as trader risk aversion eased. The Euro has also been dented today after German Industrial Production failed to strengthen on the year in November, slipping from 0.4% to 0.1%. Suggesting that the Eurozone’s powerhouse economy is not quite as strong as might have been hoped this turned the EUR/GBP exchange rate more bearish.

There was some measure of optimism for the Pound today as pundits anticipated that the UK Visible Trade Balance would show a narrowing of the trade deficit. While the figure did ultimately narrow from -11.2 billion to -10.6 billion Pounds this was not quite as bullish as the -10.5 billion forecast. Nevertheless this improved deficit helped to shore up Sterling, prompting the EUR/GBP pairing to retreat further from a ten-month high of 0.7482.

EUR/GBP Exchange Rate Forecast: Strong US Non-Farm Payrolls Predicted to Soften Euro Today

Further Euro softness could also be in store this afternoon if the US Non-Farm Payrolls demonstrate that the world’s largest economy has continued to add jobs at a healthy rate. A solid figure here is likely to encourage the Federal Open Market Committee (FOMC) to consider making the next interest rate hike sooner rather than later, a prospect which would weigh heavily on the common currency.

Current EUR, GBP Exchange Rates

At the time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending lower at 0.7433, while the Pound Sterling to Euro (GBP/EUR) pairing was making gains in the range of 1.3450.