Euro (EUR) Slumps Today as German Trade Surplus Narrows
A disappointing raft of German data has helped to push the Euro to Pound Sterling (EUR/GBP) exchange rate onto a downtrend on Tuesday morning, particularly as Germany’s trade surplus narrowed far more sharply than pundits had anticipated. With the strength of the Eurozone’s powerhouse economy in doubt the EUR/GBP currency pair has been trending lower around 0.7750.
Although confidence in both the UK and Eurozone was revealed to have fallen this morning, the Euro to Pound Sterling (EUR/GBP) exchange rate has continued to make gains.
Dovish BoE Comments Weighed on Pound Sterling (GBP) Exchange Rate with Odds of 2016 Rate Hike Dented
In spite of Eurozone data proving relatively unimpressive ahead of the weekend, the Euro to Pound Sterling (EUR/GBP) exchange rate nevertheless made some marked gains. The Pound (GBP) was softened considerably by the more dovish tone of the Bank of England (BoE) policy meeting, as members of the Monetary Policy Committee (MPC) voted unanimously to leave interest rates unchanged. With previously dissenting hawk Ian McCafferty back in the fold the odds of an interest rate hike before the end of the year seemed to diminish, particularly given the downwards revision to the central bank’s inflation report.
While German Factory Orders revealed a sharper contraction in demand than traders had expected, the Euro (EUR) remained on stronger form on Friday. Benefitting from the weakness of the Pound, the single currency was equally shored up by the declining appeal of the US Dollar (USD), which suffered a particularly bad week of losses. As the latest US Non-Farm Payrolls report proved rather more mixed than pundits had hoped, the negative correlation of the Euro to US Dollar (EUR/USD) exchange rate bolstered the common currency across the board.
Declining UK Business Confidence sees Euro to Pound Sterling (EUR/GBP) Exchange Rate Making Gains Today
Traders have continued to move away from Sterling this morning after a survey from BDO revealed that UK business confidence has fallen to a three-year low, pushing the Business Optimism Index down to the neutral level of 100.0. Manufacturing sector contraction and ‘Brexit’ worries are weighing particularly on the minds of investors, giving little incentive to buy into British assets as the BoE shows no signs of raising rates in the near future.
Although the Eurozone Sentix Investor Confidence Index slipped further in February from 9.6 to 6.0, this has failed to particularly drag on the buoyant Euro today. Recent softness in domestic data has given investors little reason for confidence, particularly as global conditions remain in a relatively fragile state. While this result fell short of expectations of a decline to 7.4, the single currency has remained dominant on the back of relative weakness of the ‘Greenback’.
EUR/GBP Exchange Rate Forecast: Pound Predicted to Rally as UK Trade Deficit Narrows
Tomorrow’s UK Visible Trade Balance could offer the Pound a rallying point, however, if the trade deficit is shown to have narrowed in December. As there has been some increasing uncertainty over the strength of the UK economic recovery in recent months, investors will be looking for reassurance from a stronger figure here.
The Euro, meanwhile, is expected to weaken on the back of the latest German economic data, as the Industrial Production and Trade Balance figures are expected to show weakening. With the health of the Eurozone’s powerhouse economy of particular concern amidst global slowdown pressures, the EUR/GBP exchange rate could trend lower if the German trade surplus is found to have narrowed.
Current EUR, GBP Exchange Rates
At the time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending higher around 0.7705, while the Pound Sterling to Euro (GBP/EUR) pairing was slumped in the region of 1.2972.