EUR/GBP Exchange Rate Advances ahead of UK Public Sector Net Borrowing Report Today
Sentiment towards the Pound (GBP) has turned rather more dovish today ahead of the UK’s Public Sector Net Borrowing figure for September, with traders cautious of a repeat of August’s unexpectedly severe widening of the deficit. As such, the EUR/GBP exchange rate is making gains this morning in the region of 0.7372.
Following the announcement of further job losses in the UK steel industry Sterling (GBP) has begun to cede ground to rivals, setting the EUR/GBP pairing on an uptrend.
Slowing Chinese GDP Boosted EUR/GBP Exchange Rate on Safe-Haven Sentiment
The Pound (GBP) got off to a relatively strong start on Monday, in spite of the UK’s Rightmove House Prices figure showing a decrease on the month to slow from 6.4% to 5.6% growth in October. The housing market forms one of the greater pressures on the Bank of England (BoE) when considering interest rate decisions, with policymakers keen to avoid another market bubble from developing in the absence of tighter monetary policy. With investors generally uncertain how to react to the release of the third quarter Chinese GDP, as the figure printed above forecast but still fell to its lowest level in seven years, Sterling saw some decided benefit.
While the Euro’s (EUR) safe-haven status initially saw a rise in demand for the single currency this was counteracted by a sharp contraction shown by the August Eurozone Construction Output. After falling -0.3% in July the gauge of production slumped by -6.0% on the year, raising suggestions that the European Central Bank (ECB) could be prompted to introduce fresh monetary loosening measures sooner rather than later in order to stimulate growth.
UK Steel Industry Concerns Weigh on Pound (GBP) Today, Euro (EUR) Making Gains in spite of Weak German Data
Sentiment towards Sterling has nevertheless begun to sour this morning with the revelation that the UK steel industry could be facing up to 1,200 fresh job losses. This follows the closure of the Redcar steelworks, costing 2,200 jobs, and the announcement that steel products company Caparo Industries has entered administration. With the domestic industry under increasing pressure as a result of cheap Chinese imports being dumped into the European market this has dealt another blow to the prospects of the local economy and lowered the odds of the BoE opting to raise rates in the near-term.
German Producer Prices slumped today, printing lower than expected as the year-on-year figure contracted from -1.7% to -2.1%. While this does suggest that the economic conditions of the Eurozone are remaining persistently weak pundits remain relatively confident that the ECB will not opt for further monetary loosening at Thursday’s Rate Decision. As a result this has allowed the EUR/GBP exchange rate to begin making some strong gains on Tuesday morning.
EUR/GBP Exchange Rate Forecast: UK Public Sector Borrowing Figure Could Trigger Pound Resurgence
Wednesday’s Public Sector Net Borrowing result for the UK could prompt a Pound rally, particularly if government debt is shown to have narrowed on the month after August’s unexpectedly wide deficit. If the figure reveals a widening of public spending in September, however, the EUR/GBP pairing could stand to take further ground on the back of a softened Sterling.
In advance of Thursday’s ECB Rate Decision the common currency is likely experience some volatility, with traders remaining cautious as to the possibility of President Mario Draghi attempting to talk down the currency in lieu of any actual shifts in monetary policy.
Current EUR, GBP Exchange Rates
At time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was climbing in the region of 0.7333, while the Pound Sterling to Euro (GBP/EUR) pairing downtrends in the range of 1.3636.