Eurozone Economic Sentiment Weakens to Worry Euro (EUR), Sterling (GBP) Trending Higher ahead of UK Employment Data
The single currency (EUR) failed to be particularly weighed down by yesterday’s disappointing ZEW Surveys, in particular an unexpectedly severe slump on the Economic Sentiment Index for October which fell from 12.1 to 1.9. However, ahead of fresh UK employment data sentiment has picked up towards the Pound (GBP), pushing the GBP/EUR exchange rate higher in the range of 1.3413 this morning.
A weaker than forecast printing on the UK’s Consumer Price Index this morning has seen the Pound (GBP) decline, helping to push up the EUR/GBP conversion rate.
Limited Improvement on UK Trade Deficit Saw Pound (GBP) Decline, Euro (EUR) Boosted by European Central Bank (ECB) Minutes
Ahead of the weekend the EUR/GBP exchange rate was substantially buoyed by the publication of the UK Visible Trade Balance, which revealed a wider deficit than pundits had expected. Showing that the recovery of the domestic economy remains fragile, this set the Pound (GBP) on a strong downtrend against rivals, spurred further by disappointing Construction Output figures. Also on Friday, Chancellor of the Exchequer George Osborne spoke at the IMF-World Bank annual meeting in Lima, throwing doubts on the ability of the UK economy to sufficiently weather negative global headwinds.
The Euro (EUR), meanwhile, saw an increase in appeal thanks to the latest meeting minutes of the European Central Bank (ECB), which suggested that policymakers were reluctant to imminently engage in fresh monetary loosening measures. With the prospect of a weakened single currency reduced the EUR/GBP pairing was able to climb to a weekly high of 0.7426.
UK Inflation Turned Negative in September to Weigh down Sterling (GBP) Today, EUR/GBP Exchange Rate Advances
While not particularly surprising, this morning’s finalised German Consumer Price Index data proved supportive of the common currency. The confirmation of the provisional September figures showed that year-on-year inflation within Germany remained at 0%. Although not the most encouraging of figures, considering the ECB target range of 2%, the lack of change in the reading helped to shore up the Euro after yesterday’s general lack of data.
Hopes for a Pound rally were dashed, however, as the UK Consumer Price Index printed disappointingly. While the core figure failed to rise as forecast, remaining static at 1.0%, the baseline figure surprised traders by contracting to -0.1% rather than holding steady a 0% as anticipated. As this is the first negative reading on the index since April Sterling has naturally entered a downturn across the board, with the EUR/GBP exchange rate surging to an initial peak of 0.7472.
EUR/GBP Exchange Rate Forecast: Euro Downturn Possible on Upcoming ZEW Economic Surveys
Later today the German ZEW Economic Surveys for October will see release, with the potential to return the single currency to a downtrend if the results conform to expectations and show weakening confidence in the Eurozone’s powerhouse economy. The Volkswagen emissions scandal, still ongoing, and fresh weakness from China over the past month could have had a significant negative impact upon local business sentiment.
A swath of UK employment data will be published tomorrow, which could provide a rallying point for the struggling Sterling. Should Jobless Claims Change demonstrate the decided decline in unemployment benefits claims forecast and an increase in Average Weekly Earnings figures the Pound may advance strongly.
Current EUR, GBP Exchange Rates
At time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7455, while the Pound Sterling to Euro (GBP/EUR) pairing was retreating in the range of 1.3415.