Common Currency (EUR) Bullish in spite of Unimpressive German Trade Balance Figure as Markets Await Bank of England (BoE) Comments
Although the German Trade Balance was revealed to be significantly more disappointing than expected this morning, the national surplus narrowing from 25 billion Euros (EUR) to 15.3 billion, the single currency has remained on relatively strong form against rivals. As such, ahead of the Bank of England (BoE) Rate Decision, the EUR/GBP exchange rate is trending positively in the range of 0.7369.
With the German industrial sector continuing to feel the effects of economic slowdown, the EUR/GBP exchange rate has been weighed down further by the release of a UK Industrial Production figure which bettered forecasts.
Euro (EUR) Advanced on German Construction and Eurozone Retail PMIs as Sterling (GBP) Remained Dovish on Lack of Domestic Data
Although German Factory Orders fell pointedly short of forecasts yesterday, with the year-on-year figure clocking in at 1.9% rather than the expected 5.6%, the single currency (EUR) was not held down for long. With both the German Construction and Eurozone Retail PMIs showing improvement on the month, construction output in the currency bloc’s major economic powerhouse surging from 50.3 to 52.4, the fears of pundits were somewhat allayed. These stronger performances eased concerns that the European Central Bank (ECB) could be prompted into implementing fresh monetary loosening measures in order to counteract the apparently weakening local recovery.
As the Pound (GBP) was lacking in any supportive domestic data releases the EUR/GBP exchange rate consequently climbed to a daily peak of 0.7405.
German Industrial Production Shortfall Continues to Raise Concerns of Slowing Eurozone Recovery, EUR/GBP Pairing Slides with Improved UK Industrial Output Today
After the International Monetary Fund (IMF) downwardly revised its forecast for global economic growth, issuing a warning that the present trend of limited recovery could turn into stagnation over the next year, the EUR/GBP conversion rate was sparked into fresh volatility. With the suggestion that growth would remain weaker within the Eurozone and that the UK would be the second-fastest grower of the G7 nations, investors were inclined to favour Sterling.
This uptrend was sustained by the release of disappointing German Industrial Production data in contrast to an above-estimate corresponding figure from the UK. Nevertheless, domestic Manufacturing Production was shown to have contracted further than anticipated, coming in at -0.8% rather than -0.2%. This weaker showing failed to particularly impact the Pound, however, as the EUR/GBP exchange rate continued to slump to a weekly-low of 0.7340.
EUR/GBP Exchange Rate Forecast: Mood of Bank of England (BoE) Policymakers at October Meeting to Drive Pound Sentiment
The afternoon’s NIESR Gross Domestic Product Estimate for the UK could prompt a further strengthening of Sterling, although given recent PMI disappointments it does seem unlikely that the nation’s September GDP will be of a particularly hawkish nature. However, further volatility will likely be triggered by Thursday’s Bank of England (BoE) Rate Decision. Although policymakers are expected to leave the cash rate unchanged, the tone of the accompanying meeting minutes could prove fuel to investors.
Tomorrow’s German Trade Balance may soften the common currency further, as the national surplus is expected to narrow and could potentially fall short of estimates considering recent indications of economic slowdown.
Current EUR, GBP Exchange Rates
At time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7346, while the Pound Sterling to Euro (GBP/ERU) pairing was gaining ground around 1.3613.