Somewhat Hawkish Tone of Bank of England (BoE) Meeting Minutes Saw the Pound (GBP) Strengthen Further
After the Bank of England (BoE) opted to leave the benchmark interest rate unchanged from 0.5%, the Pound (GBP) was bolstered by the revelation of more optimistic sentiment amongst the Monetary Policy Committee (MPC). The meeting minutes showed that policymakers remain committed to the prospect of a hike in the coming months, in spite of some noted concerns over the economic slowdown in China. As the German Consumer Price Index data came in on forecast this morning, however, the EUR/GBP exchange rate has begun to retake its recent losses to trend around 0.7317.
In spite of trader caution in advance of today’s Bank of England (BoE) Rate Decision, the EUR/GBP pairing is on a downtrend thanks to the returning potential of a messy Grexit.
UK Trade Deficit Widened to Boost EUR/GBP Conversion Rate in Wake of Improved Eurozone GDP
The Pound (GBP) has returned to bearish form this week as fresh economic data from the UK has proved disappointing with another batch of shortfalls. Year-on-year Manufacturing Production for July contracted -0.5% in spite of expectations for an unchanged figure, as Industrial Production also fell significantly to clock in at 0.8% rather than 1.4%. As further evidence that the domestic economy is distinctly impacted by prevalent global slowdown fears and Chinese market volatility this naturally saw the appeal of Sterling decrease significantly. A wider than anticipated Visible Trade Balance also weighed on the British currency as it increased from 8.5 to 11 billion Pounds, a concerning figure ahead of the imminent Bank of England (BoE) Rate Decision.
Although Tuesday had produced a Eurozone Gross Domestic Product superior to forecast, which demonstrated an unexpected rise to 1.5% on the year, a general dearth of local data in the rest of the week has prevented the single currency (EUR) from particularly capitalising on the softness of its rival.
Common Currency (EUR) Floundering on Renewed Threat of Potential Grexit Today as 2015 Greek Elections Draw Nearer
Ahead of today’s BoE meeting of the Monetary Policy Committee (MPC) investors had been displaying some caution towards Sterling, with the expectation of a held rate until Q3 2016 considered to be relatively dovish. The British Chambers of Commerce have recently cautioned against the dangers to the domestic economy of a too hasty decision to hike, suggesting that interest rates need to remain at their current level into the second or even third quarter of 2016. Given the continued uncertainty of the global economy as the result of further wobbles in China, the Pound could potentially benefit from the MPC taking a decidedly realistic approach to the matter.
Meanwhile, the Euro has been suffering as stock markets swing today and Greece draws closer to its latest general election. European Commission President Jean-Claude Juncker yesterday iterated that whichever government emerges from these latest polls will not be able to renegotiate the terms of the nation’s August bail-out. With the threat of a Grexit thus still on the cards, the single currency has seen a decline in demand, pushing the EUR/GBP exchange rate steadily down throughout the morning.
EUR/GBP Exchange Rate Forecast: Pound May Weaken on Upcoming Bank of England (BoE) Data
The results of both the BoE Rate Decision and tomorrow’s 12-month Inflation Forecast stand to alter the current outlook of the Pound if they prove to be sufficiently bearish in tone. However a more hawkish tilt could equally result in a more substantial strengthening of Sterling and consequently weigh further on the EUR/GBP conversion rate.
Friday’s German Consumer Price Index data may prompt Euro sentiment to pick up with a strong showing, while weaker figures here could prevent the common currency from recovering its lost ground ahead of the weekend.
Current EUR, GBP Exchange Rates
At time of writing the Euro to Pound Sterling (EUR/GBP) exchange rate remains in a slump at 0.7268, while the Pound Sterling to Euro (GBP/EUR) pairing is trending around 1.3757.