EUR/GBP Conversion Rate Forecast to Trend within a Tight Range despite Dovish Lautenschlaeger
Although European economic data produced disappointing results today, and in spite of a dovish speech from European Central Bank (ECB) official Sabine Lautenschlaeger, the Euro continues to hold a comparative position of strength versus its major peers. This is partly due to rising European stock values, but also thanks to improved Chinese Trade Balance data which saw imports contract less-than-expected in December. Eurozone Industrial Production in November saw annual output growth of 1.1%, missing the median market forecast 1.3% production growth.
A speech from ECB’s Lautenschlaeger today caused some ripples of anxiety amongst traders, although the affect has not translated into marked Euro depreciation. Lautenschlaeger stated that some large Eurozone banks are falling short of the central bank’s expectations with regards to the management of liquidity. ‘Some banks are failing to meet our expectations in terms of the management of liquidity risk,’ Sabine Lautenschlaeger, who represents the ECB’s supervisory arm on the bank’s Executive Board, said. ‘We will therefore be paying particular attention to banks’ internal liquidity management.’
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7503.
GBP/EUR Conversion Rate Predicted to Hold Steady despite EU Referendum Uncertainty
With a complete absence of domestic data to provoke volatility today, the Pound softened in response to ongoing concerns regarding the forthcoming EU referendum. Not only is uncertainty regarding the outcome of the vote weighing on demand for the Pound, but also uncertainty as to the timing of the vote is having a detrimental impact on investor confidence. Additional Sterling losses can be linked to concerns that tepid wage growth and low inflation will cause the Bank of England (BoE) to delay a cash rate hike until the last-quarter of 2016.
Bank of America Merrill Lynch has moved prediction of a BoE rate hike from May to November of this year. ‘At the least, subdued inflation gives the BoE plenty of room to wait,’ said Merrill. ‘Recent BoE statements suggest to us an increasing preference for waiting longer, until they get closer to seeing the ‘whites of the eyes of inflation’. If the jobless rate keeps falling as fast as in 2015 it could push towards 4.5% by end-2016. We find it hard to imagine the BoE not hiking rates then.’
The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low of 0.7464 during Wednesday’s European session.
Euro to Pound Sterling Forecast: German GDP and BoE Rate Decision to Provoke Volatility
Thursday will see a packed economic docket with several influential data publications pertaining to both the UK and Europe. German Gross Domestic Product for 2015 is very likely to provoke Euro movement, with the market consensus of 1.7% growth on the year. For those trading with the Pound, the BoE interest rate decision will be significant. Whilst the BoE are not expected to make any changes to monetary policy outlook at this time, the accompanying meeting minutes will be closely scrutinised for any clues as to policymaker outlook.
The Euro to Pound Sterling (EUR/GBP) exchange rate climbed to a high of 0.7526 during Wednesday’s European session.