Sluggish Eurozone Inflation Increases Pressure on ECB
Eurozone CPI figures have printed worse than expected, with Core CPI falling to 0.9% instead of remaining level at 1.1%, while non-core CPI held steady at 0.1% instead of rising to 0.2%. While the Euro has dropped across the board, it is managing to trend only narrowly in the negative region against Pound Sterling, which has been weakened by a drop in the Construction PMI from 58.8 to 55.3.
Eurozone Unemployment Falls to Lowest Level Since January 2012
The Eurozone Unemployment Rate has emulated the German data by posting an unexpected fall from 10.8% to 10.7%. The number of people out of work in the currency bloc fell by 13,000 to 17.24 million. Unemployment in the Eurozone has fallen by 0.8% so far this year and is currently at a low not seen since January 2012. Since October 2014, 1.3 million extra people have found employment.
The EUR/GBP exchange rate is currently trending narrowly as positive data for both currencies holds the pairing level. While German unemployment unexpectedly fell, the Bank of England (BoE) has revealed that all seven of the UK’s major lenders have passed stress tests designed to assess how prepared they are for a significant global crisis.
EUR/GBP Exchange Rate Forecast: Positive Eurozone Data Causes Euro Uptick
Eurozone PMIs and German unemployment have all printed positively, with the exception of the French Manufacturing PMI, which posted a small dip from 50.8 to 50.6. Regarding the French contraction, Markit Senior Economist Jack Kennedy said that ‘While there were no specific reports from surveyed manufacturers of an immediate drop in orders following the Paris attacks, the likely effect on consumer confidence will clearly not help the sector’s prospects of breaking out of its prolonged sluggish phase as we head towards the end of the year.’
The Eurozone PMI held steady at 52.8, Italian Manufacturing rose to 54.9 and German Manufacturing increased to 52.9.
The big news was that the seasonally adjusted German Unemployment Rate has unexpectedly fallen from 6.4% to 6.3%, with an Unemployment Change of -13k being well above the -5k forecast.
The EUR/GBP exchange rate is currently trending in the region of 0.7023.
GBP/EUR Exchange Rate News: Pound Sterling Slides as UK Manufacturing Falls
While Eurozone manufacturing PMIs printed mostly positively, the UK Manufacturing index fell from a 16-month high of 55.2 to a worse-than-expected level of 52.7. SMEs are so far unable to match the growth of larger companies, with most of the recorded expansion in the sector coming from the latter.
In better news, the Bank of England revealed that all seven of the UK’s major banks have passed stress tests, showing that they are in a strong position to resist the fallout of another global financial crisis. The test includes several possible scenarios which could have a strong impact upon the UK economy, including a slowdown in China’s growth to 1.7%, oil prices falling to $38 per barrel and a drop in the GBP/EUR exchange rate of 15%. While all banks have passed, RBS and Standard Chartered have been identified as the weakest members, although they avoided receiving orders to present a new plan to the BoE as they have already taken steps to improve their reserves.
The GBP/EUR exchange rate is currently trading between 1.4213 and 1.4271.
EUR/GBP Exchange Rate Forecast: Focus on ECB Stimulus Could Slow Euro Growth
The positive Eurozone economic news has caused a Euro uptick, however investors remain focussed on the interest rate decision due to be delivered by the European Central Bank (ECB) on Thursday. With the threat of additional stimulus hanging over the markets, investors are waiting to see if dovish ECB President Mario Draghi will increase the €1.1 trillion asset purchasing programme, cut interest rates, or both.
The EUR/GBP exchange rate is currently trading between 0.7005 and 0.7030.